Interactive Brokers FCA Regulation 2024: Supervision, Investor Protections, and More

Interactive Brokers is a leading forex and CFD broker that provides online trading services to traders and investors worldwide. It offers an extensive range of trading instruments, including Stocks, options, futures, currencies, bonds, and funds. The broker supports various trading platforms and tools such as WebTrader, FIX API, MobileTrader (MobileApp), TWS.

Interactive Brokers is highly regarded for its regulation by multiple authoritative bodies, including the SEC, CFTC, FCA, FSCS, FINRA, FCM,  IIROC, MAS, FSA. This multi-regulatory oversight underscores its commitment to maintaining high standards of safety and transparency.

In this article, we will explore Interactive Brokers’s FCA regulation, its importance, the investor protection scheme, and negative balance protection. Additionally, we will provide information on other brokers regulated by the FCA. 

Does Interactive Brokers Operate Under FCA Regulation?

Yes, Interactive Brokers operates under FCA regulation. The FCA reference number of this firm is 684312. This regulation ensures that the broker adheres to the high standards set by the FCA, providing a layer of security and trust for its clients. Being FCA-regulated means that Interactive Brokers must follow strict guidelines to protect client funds, ensure transparency, and maintain the integrity of its operations.

What is FCA?

FCA stands for the Financial Conduct Authority. It is one of the top-tier regulators in the world, responsible for overseeing financial markets and firms in the United Kingdom. Established on April 1, 2013, the FCA took over from the Financial Services Authority (FSA). The FCA oversees approximately 42,000 businesses, including banks and investment firms. Its goal is to ensure that these firms, banks, and financial institutions operate fairly and transparently. The FCA enforces strict rules; for instance, it requires firms to keep client money in separate accounts. It also limits leverage to 30:1 for retail clients and provides negative balance protection.

Additionally, the FCA mandates a 50% margin close-out rule. It also offers dispute resolution through the Financial Ombudsman Service (FOS). Furthermore, the Financial Services Compensation Scheme (FSCS) provides compensation of up to GBP 85,000 if a firm fails. These measures help protect consumers and maintain trust in the financial system

How FCA Regulation Safeguards Retail Traders

Here are five key protections for retail traders under FCA regulation. As an FCA-regulated forex broker, Interactive Brokers offers these protections

1. Safety of Client Funds:

The FCA’s primary function is to protect consumers from unfair practices. This includes requiring brokers to hold client funds in segregated accounts, separate from their operating funds. This safeguard helps protect your money from potential misuse. By ensuring these accounts are compliant with strict regulations, your funds remain secure even if the broker faces financial difficulties.

2. Negative Balance Protection:

 The FCA mandates negative balance protection for retail clients, meaning you cannot lose more money than you have deposited. Additionally, the 50% margin close-out rule automatically closes your positions when your account balance falls below a certain level. This rule is designed to prevent significant negative balances, offering peace of mind while trading.

3. Strict Leverage Limits:

To help manage risk, the FCA enforces strict leverage limits of 30:1 for retail clients. This measure is particularly crucial in volatile markets, where high leverage can lead to substantial financial losses. By capping leverage, the FCA aims to reduce risk exposure and protect investors from excessive losses.

4. Stringent Reporting Requirements:

FCA-regulated brokers must adhere to rigorous reporting standards, providing regular updates on their operations. This includes client asset reports, transaction reporting, and market data reporting. Such transparency ensures that brokers operate fairly and honestly, giving you confidence in their practices.

5. Dispute Resolution and Compensation:

 In case of disputes with your broker, the Financial Ombudsman Service (FOS) serves as an independent body to resolve issues fairly and impartially. If a firm fails, the Financial Services Compensation Scheme (FSCS) offers protection of up to £85,000 per eligible investor, ensuring you are not left out of pocket. This compensation provides an additional layer of security for your investments.

How Can I Verify If My Broker is FCA Regulated?

To verify if your broker, such as Interactive Brokers, is regulated by the FCA, follow these steps:

1. Find the Broker’s Reference Number or Name: Obtain this information from the broker’s website.
2. Search the FCA Register: Visit the FCA Financial Services Register and enter the broker’s reference number or name.
3. Check the Broker’s Authorization: Ensure that the broker is authorized to provide “Rolling spot forex contract” services to retail customers in the UK.
4. Match Firm Details: Verify that the details on the FCA website, such as the broker’s website and email, match those provided by the broker. Any discrepancies might indicate an unauthorized broker, and you should avoid trading with them.

FCA-Regulated Forex Brokers: Who Else Is on the List?

Interactive Brokers is one of the leading FCA-regulated forex brokers. However, there are other FCA-regulated forex and CFD brokers that can serve as alternatives to Interactive Brokers. These alternatives include:

These brokers operate under FCA regulation. According to FCA rules, they offer leverage up to 30:1 and provide investor protection and negative balance protection for retail traders. To learn more about FCA-regulated forex brokers, you can read our content on the best FCA-regulated forex brokers.

What Other Regulations Does Interactive Brokers Have?

SCB (Securities Commission of The Bahamas):

Interactive Brokers is also regulated by SCB. Established in 1995, SCB  regulates and oversees the financial services industry. The SCB ensures that Interactive Brokers follows guidelines for maintaining adequate capital, protecting client assets, and ensuring transparent operations for clients from various regions, particularly those outside Europe and Australia.

CFTC:

Interactive Brokers is regulated by the Commodity Futures Trading Commission (CFTC) for its operations involving U.S. clients. The CFTC, established in 1974, is an independent U.S. government agency that regulates the futures and options markets.

The CFTC requires Interactive Brokers to adhere to strict standards for financial conduct, including maintaining sufficient capital, segregating client funds from company assets, and ensuring transparency in trading practices. The CFTC’s oversight helps protect U.S. investors by ensuring that brokers like Interactive Brokers operate with integrity and comply with regulatory requirements.

MAS:

Interactive Brokers is regulated by the Monetary Authority of Singapore (MAS). MAS, founded in 1970, is the government body responsible for overseeing financial institutions in Singapore, ensuring financial stability and investor protection.

Under MAS regulation, Interactive Brokers must follow strict rules, including maintaining enough capital, keeping client funds separate from company assets, and providing regular financial reports. MAS supervises forex trading and limits the maximum leverage to 1:20 to manage risk. Although there is no specific protection scheme, MAS’s oversight ensures that Interactive Brokers operates safely and transparently. For more details, you can visit their website: http://www.mas.gov.sg.

FINRA

Interactive Brokers is also regulated by the Financial Industry Regulatory Authority (FINRA) for its operations involving U.S. clients. FINRA, established in 2007, is a non-governmental organization that regulates member brokerage firms and their registered representatives.

FINRA requires Interactive Brokers to adhere to strict standards for financial stability, transparency, and client protection. This includes maintaining adequate capital reserves, keeping client funds separate from company assets, and ensuring accurate and timely reporting. FINRA’s oversight helps ensure that Interactive Brokers operates fairly and transparently, protecting U.S. investors and maintaining trust in the financial markets.

IIROC:

Interactive Brokers is regulated by the Investment Industry Regulatory Organization of Canada (IIROC). IIROC, established in 2008, is a national self-regulatory organization responsible for overseeing investment dealers and trading activities in Canada’s debt and equity markets.

IIROC requires Interactive Brokers to comply with strict standards, including maintaining sufficient capital, segregating client funds from company assets, and providing transparent, regular financial reporting. IIROC’s regulation ensures that Interactive Brokers operates with integrity, offering a secure and transparent trading environment for clients in Canada, protecting investors, and ensuring market fairness.

FSCS

Interactive Brokers is also covered by the Financial Services Compensation Scheme (FSCS) in the UK, which provides essential protection for clients. The FSCS was established to safeguard consumers in the event that a regulated financial firm, such as Interactive Brokers, is unable to meet its obligations. Under this scheme, clients can receive compensation of up to £85,000 per person if the broker becomes insolvent.

This coverage reinforces the confidence clients can have in Interactive Brokers, as it ensures their funds are protected in a dynamic trading environment. The FSCS plays a vital role in maintaining trust and security within the financial markets, assuring clients that their investments are secure and fostering a high level of integrity in Interactive Brokers’s operations.

FCM

Interactive Brokers is also regulated as a Futures Commission Merchant (FCM) by the Commodity Futures Trading Commission (CFTC) in the United States. The CFTC, established in 1974, oversees the derivatives markets, ensuring their integrity and protecting market participants from fraud and abuse.

As an FCM, Interactive Brokers is required to adhere to stringent regulations that include maintaining sufficient capital, segregating client funds, and providing transparency in trading operations. This regulation helps ensure that client funds are safeguarded and that trading practices are fair and compliant with industry standards. By being regulated as an FCM, Interactive Brokers offers clients in the U.S. added confidence and security, reinforcing its commitment to maintaining a trustworthy trading environment.

FSA

FSA regulation refers to the rules and oversight provided by the Financial Services Agency (FSA) of Japan. Established in 2000, the FSA supervises financial institutions including banks, insurance companies, and forex brokers to ensure the stability and fairness of Japan’s financial system. It works to protect investors and maintain confidence in the market.

Financial service providers, such as forex brokers, must be licensed by the FSA to operate in Japan. The FSA enforces strict standards on capital requirements, risk management, and transparency. It requires firms to segregate client funds to ensure their protection and implement robust measures to prevent financial misconduct. By enforcing these regulations, the FSA plays a key role in upholding market integrity and safeguarding investor interests.

Frequently Asked Questions

What is Interactive Brokers?

Founded in 2010 by Owen Kerr and Joe Davenport, Interactive Brokers is a forex and CFD broker that provides trading services to traders and investors. Interactive Brokers offers a diverse range of trading instruments, including forex, stocks, indices, commodities, and cryptocurrency CFDs. The broker is regulated by seven top-tier regulatory authorities, including ASIC, CySEC, FCA, DFSA, BaFIN, CMA, and SCB. Interactive Brokers is renowned for its fast execution and tight spreads.

Is Interactive Brokers Considered Safe under FCA regulation?

Yes, Interactive Brokers is considered safe under FCA regulations. FCA is one of the top regulators in the UK and is recognized globally. The FCA offers key protections for retail clients, including a leverage cap of 30:1, segregated client funds, and negative balance protection, ensuring clients can’t lose more than their deposits. The 50% margin close-out rule adds further safety by automatically closing positions to limit losses. 

The FCA also ensures investor protection through the Financial Services Compensation Scheme (FSCS), which covers up to £85,000 per eligible investor. For disputes, the Financial Ombudsman Service (FOS) provides free resolution services, ensuring transparency and safety under FCA supervision

Besides FCA, the broker is regulated by other major regulatory authorities, including the SEC, CFTC, FCA, FSCS, FINRA, FCM,  IIROC, MAS, FSA. These regulations ensure strict compliance with industry standards and provide protection for client funds.

What is the Maximum Leverage of Interactive Brokers Under FCA regulation?

The maximum leverage offered by Interactive Brokers under FCA regulation is 30:1 for retail traders. However, leverage may vary based on the tradable assets.

Here are the Interactive Brokers leverage limits under FCA regulation:

• 30:1 for major currency pairs (e.g., GBP/USD, EUR/USD,)
• 20:1 for non-major currency pairs, gold, and major indices (e.g, S&P 500, Nasdaq 100 (US)
• 10:1 for commodities other than gold and non-major equity indices
• 5:1 for individual equities and other reference values

What is the Minimum Deposit for Interactive Brokers Under FCA regulations?

Interactive Brokers has no minimum deposit requirement, meaning you can start trading with as little as $0. However, for margin requirements and efficient trading, the broker recommends starting with at least $200 or equivalent.

Does Interactive Brokers Offer Negative Balance Protection?

Yes, Interactive Brokers offers negative balance protection. All FCA-regulated brokers must offer negative balance protection. Negative balance protection means that traders are protected from losing more money than they have in their trading accounts. If a trade results in losses that exceed the amount of funds in the account, negative balance protection ensures that the trader’s balance cannot go below zero. This prevents the trader from owing the broker any additional money.

Does Interactive Brokers Offer an Investor Protection Scheme?

Yes, Interactive Brokers offers an investor protection scheme in accordance with FCA regulations. All brokers regulated by the FCA must provide this protection. In the event of a bank’s liquidation, losses would be distributed among clients based on the proportion of their funds held with the failed bank.

Any loss of funds resulting from this may be compensated under the Financial Services Compensation Scheme (FSCS). The FSCS provides compensation up to a strict limit of £85,000 per person, per institution, and this limit is subject to the total balances held with that institution.