Best Forex Brokers in Sweden

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Is Forex Trading Legal in Sweden?

Swedes can legally engage in forex trading on condition they do so at brokerage firms operating with licenses from the Swedish Financial Supervisory Authority or another financial regulator based in a member state of the European Union (EU) or the European Economic Area (EEA). Licenses issued by national competent authorities like CySEC (Cyprus), BaFin (Germany), FI-FSA (Finland), and AMF (France), among others, all hold legal weight in Sweden. These watchdogs adhere to the requirements outlined in the Markets in Financial Instruments Directive 2014 (MiFID II), which serves as a standardized rulebook for all financial services providers operating in the EU and the EEA.

Trading forex through local banks is also a legal option for Swedish residents. Forex brokers must satisfy various criteria to receive operational authorization in the Nordic country. European-based brokers must meet minimum capital requirements ranging from €50,000 to €730,000, a threshold they should always maintain. The firms must also have sufficient funding to meet their operating expenses until they manage to reach profitability.

Customers of Sweden-authorized brokers should have access to transparent pricing. Brokers must fill their orders at the best possible bid-ask spreads. Various mechanisms for consumer protection should be in place, including retail leverage caps, negative balance protection, automated margin closeouts, and standardized risk warnings for CFD trading.

There are various ways to legally trade forex in the country, including spot trading and derivative trading through CFDs, forex options, and futures. Marketing and distributing binary options to non-professional traders in Sweden is prohibited, although some residents engage in binary options trading at offshore brokerages at their own risk.

Forex Trading Regulators in Sweden

The Swedish Financial Supervisory Authority (Finansinspektionen) regulates all financial services providers in the country under the provisions of the Securities Market Act (2007:528). The legislation is based on MiFID II so most of the rules it contains overlap with EU regulations. The Stockholm-based watchdog assumed its regulatory responsibilities after the merger of the Bank Inspectorate and the Insurance Supervision Authority in 1991. It falls under the umbrella of the Swedish Ministry of Finance.

The primary tasks of Finansinspektionen are ensuring the stability of the local financial system and overseeing the operations of all authorized market participants, including local banks, insurance companies, and firms facilitating trading in securities. Finansinspektionen issues operating permits to approved forex broking companies and monitors them for compliance with local laws and MiFID II.

Ensuring high levels of consumer protection is another important responsibility of Finansinspektionen. The regulator achieves this by imposing restrictions on leveraged trading with derivatives and ensuring authorized brokers act in the best interests of their clients. Finansinspektionen has the remit to issue warnings and levy fines on brokers for non-compliance, revoking their licenses in cases of repeated or severe transgressions.

Brokerages licensed in other EU and EEA member states can also legally service Swedish traders as long as they cover the requirements outlined in Chapter 4 of the Securities Market Act. Such companies are not necessarily required to obtain licenses from the Swedish regulator. However, Finansinspektionen must receive official notifications from the respective EU regulatory bodies before the brokers in question commence operations in Sweden.

How to Identify Forex Brokers Authorized in Sweden

Although not obligatory, trading with brokers regulated by Finansinspektionen is advisable if you reside in Sweden. Locally licensed forex broking firms maintain high standards of security, price transparency, and consumer protection, ensuring fair trading conditions for all Swedes. Identifying Sweden-authorized brokers is beyond simple since this information is easily verifiable at Finansinspektionen’s website.

The Swedish regulator runs an official company register of all local and cross-border businesses sanctioned to offer financial services in the Nordic country. If your broker is featured in the database, its name will come up in the search results, alongside its registered address, corporate ID number, and license status (active, revoked, etc). Swedes can search authorized brokerage firms by name, identification number, or area. The advanced search functionality enables you to look up companies based on their home country.

Finansinspektionen also maintains a warning list of entities providing trading and financial services without due authorization. Clone firms illegally borrowing the names of regulated companies for fraudulent purposes are also featured on Finansinspektionen’s investor warning list. Feel free to check it upon suspicion your broker operates outside the regulatory frameworks of Sweden and the EU.

Security at Swedish Brokers

Security should be your last concern if you trade forex at Sweden-compliant brokers. Broking firms authorized to serve customers from the Swedish market maintain high standards of investor protection and transparency. Segregating client funds from broking companies’ operational capital is a standard practice mandated by Swedish and EU financial regulations. It ensures client assets remain well-protected at all times, even in the unlikely event of broker insolvency. Swedish traders can have their peace of mind as their money is stored in segregated accounts at tier-one banks based in Europe.

Retail clients are also entitled to investor compensation of up to SEK 250,000 (€20,000) per person if a regulated broker is unable to return their assets due to bankruptcy or other financial challenges. Trading with derivatives like CFDs is a risky endeavor, especially for unversed retail traders who often underestimate the financial dangers associated with using excessive leverage.

Sweden-authorized broking firms implement maximum leverage caps (1:30) to at least partially mitigate the risk of margin trading. Automatic margin closeout rules are in place on a per-account basis, meaning that clients’ equity must cover at least 50% of the margin necessary to maintain their leveraged positions open.

Brokers must additionally post standardized warnings on their websites to inform retail traders about the risk of losing money when trading CFDs with leverage. Regulated firms cannot actively encourage retail clients to invest in complex leveraged derivatives. The aggressive advertising of such high-risk products is also prohibited in Sweden (and the EU as a whole).

Negative Balance Protection at Swedish Brokers

Negative balance protection is another fundamental practice mandated by EU financial watchdogs, including Finansinspektionen. This safeguard prevents traders from losing more money than their available balance. Without negative balance protection, traders risk becoming indebted to their brokers when the markets gap or move abruptly against their leveraged CFD positions. Should this happen, regulated brokers will reset their balance to zero and traders will sustain no residual losses. This mechanism goes hand in hand with the automated margin closeouts we discussed in the previous section.

Taxes on Forex Trading Profits in Sweden

Before you venture into the exciting (and hopefully lucrative) world of forex trading, you should consider using the services of a professional tax advisor. Profits derived from successful forex trades are liable for capital gains taxes in Sweden. The rate is set at 30% and applies to currency trades and derivatives, including options, futures contracts, and leveraged contracts for difference. Residents of the Nordic country are responsible for reporting their taxes themselves and must do so via Form K4, Section C. Swedish traders have until May 2nd of the respective tax year to report their profits. Losses are deductible against a trader’s capital gains up to 70%.

Leverage Comparison at Sweden-Regulated and Offshore Brokers

Finansinspektionen-approved brokers can provide leverage but certain restrictions are in place to protect non-professional clients. Leverage is a useful tool because it enables traders to open bigger positions with a smaller capital overlay, inflating their market exposure and any resulting profits. But there are two sides to every coin and leverage is no exception. Traders can sustain enormous losses if a CFD market gaps or moves quickly in an unfavorable direction.

To prevent clueless retail customers from losing their shirts, Sweden-authorized brokers restrict the maximum leverage on retail accounts to 1:30 for major forex pairs and 1:20 for forex crosses, exotic pairs, gold, and major stock market indices. These ratios drop even further down for other asset classes proportionately to their volatility.

Leverage is capped at 1:10 for all commodities bar gold and non-major stock market indices, 1:5 for individual stocks, and 1:2 for cryptocurrencies. These restrictions apply in all EU and EEA member states as they all adhere to MiFID regulations.

The Australian financial regulator ASIC enforced the same caps on its licensees in 2021 as part of its product intervention. Other watchdogs like Japan’s FSA have introduced even more significant cuts, capping leverage ratios for currency pairs at 1:25. We should point out that professional traders in Sweden can benefit from higher leverage rates of 1:400 or 1:500. Continue reading for further information on how to qualify for a professional trading account at Swedish brokers.

Professional Trader Requirements in Sweden

If forex trading is your prime source of income, you should consider applying for a professional trading account at your Swedish broker. Applicants must cover several requirements to become eligible, starting with a large enough investment portfolio valued at least €500,000 in cash and financial instruments. To prove this, traders must provide recent bank statements from other regulated brokers with whom they hold accounts.

Trading frequency and trade size also bear consideration. Clients should have executed no fewer than ten large-size trades (€50,000 each) in leveraged instruments per quarter in the last twelve months prior to application. Professional traders must demonstrate greater accountability and have sufficient knowledge of derivative trading. They must have at least one year of professional experience in working in the financial industry.

Clients who satisfy the criteria will benefit from higher leverage caps and lower minimum margin requirements but these benefits come at the expense of losing their access to negative balance protection and investor compensation.

Trading Platforms at Swedish Brokers

While regulatory compliance, tight spreads, and low financing costs are all important factors to consider, Swedish traders should also pay attention to the trading platforms brokers rely on to fill their forex orders. Becoming a successful trader requires a good deal of analysis and market research. A good trading platform comes bundled with a robust range of tools for technical and fundamental analysis.

MetaTrader 4 (MT4) is ideal for this purpose as it offers 30 built-in technical indicators, hundreds of custom ones, and great charting tools. Many Sweden brokers have adopted this platform, and unsurprisingly so. MT4 supports trading across multiple asset classes, including forex, not to mention its user-friendly interface greatly streamlines the trading process for inexperienced users.

If you are looking for a slightly better speed of order execution, a richer range of features, and more tradable instruments, you should perhaps consider switching to MetaTrader 5 (MT5). MT5 has additional technical indicators, graphical objects, more widgets, and enhanced charting capabilities. All these features render it a great fit for seasoned traders but this comes at the expense of a slightly overcrowded interface that is unlikely to appeal to inexperienced traders.

TradingView is another popular choice among Swedish traders doing business with authorized brokers, although it is less broadly available. It offers multiple timeframes and quick order execution, coupled with advanced filtering options for market screening. Users can connect with other investors around the globe as TradingView is home to a thriving social-trading community. As usual, we recommend you give your chosen platform a test drive before you connect it to your live account. Most of these platforms either have demo versions or offer free trials for a limited period.