The Forex market has spread from the major financial centers of London and New York to all parts of the world. In order to keep the market under control, each country had to make sure that proper regulation and supervision is in place. In Estonia, the supervision of the capital market is regulated under the Register of Economic Activity (MTR or Majandustegevuse Register) kept by the Ministry of Economic Affairs and Communication of Estonia.
MTR or Register of Economic Activity
All operating companies in Estonia have to be entered in the MTR Register. All businesses obtain the corresponding license if they fulfill the criteria for registration and operation. This also applies to Forex brokers in Estonia, which have to be entered and duly registered in the MTR. The Ministry of Economic Affairs and Communication is in charge of monitoring activities which encourage entrepreneurship and innovation. The Ministry also encourages economic competitiveness, transparency and tries to protect the Estonian interest within the EU. As a part of the EU, Estonia has to align and harmonize its legislation with the EU laws, regulations, and directives. As far as the capital market is concerned, including Forex, the EU MiFD directive on the securities and financial market has to be respected and implemented. Many EU traders who trade in other countries have the luxury of enjoying the same rights wherever they trade within the EU. This establishes trust among investors and traders who are confident that the EU law will protect them from manipulative and scamming brokers. EU rules are very strict, and when it comes to the Forex market, Forex brokers have to meet very high standards to be able to operate. The Estonian Ministry of Economic Affairs and Communication monitors the Forex market as foreseen by the MiFD. Protection of consumers, fairness, and a healthy business environment are a part of the Ministry’s mission.
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The Economy of Estonia
Estonia’s economy is an open-type, free-market economy. The country’s economy is stable and advanced. One of the major recent changes Estonia went through was acceptance of the Euro as the official currency in 2011. The original currency was the Estonian Kroon (EEK), and after the introduction of the euro, it was set at a fixed exchange rate (15.64664 = 1 euro). This indicates that the currency was very weak against the euro. Nevertheless, Estonia’s economy is developing steadily. The unemployment rate is around 13%, but the country produces approximately 90% of its own energy. The National Bank of Estonia (Eesti Pank) stopped issuing the Estonian Kroon after the euro introduction, but still it continues to accept banknotes and coins in EEK with no expiration date. Even if many EU countries kept their old currencies in circulation along the euro (e.g. Great Britain kept the British Pound, Hungary kept the Hungarian Forint, etc.), Estonia decided to completely switch to the Euro. A stable economy of a country always sounds more promising to Forex traders and it strengthens the trust in the financial and securities markets. Therefore, many international brokers opted for Estonia as an offshore destination.
Benefits of the Estonian market for International Forex Companies
Estonia is an Eastern European country, a former Soviet Union state, which developed positively into a modern country leaving the chains of communism far behind. Still, all the former Eastern Bloc countries did not easily switch to modern ways of life and government known to the western world. This means that these countries did not have the same opportunities to grow as fast as western countries. Nowadays, they are just few steps behind the great globally dominant economies. This means that the standard of living is lower in the eastern, and even southern countries of Europe, than in the wealthy northern Scandinavian and western countries. What does this mean for Forex brokers? Well, Forex broker companies are looking for a way to cut costs, and the most efficient way proved to be transfer of offices to countries with a lower standard of living. International Forex brokers in Estonia have several benefits like lower taxes than in their homelands, and a labor force which is far more affordable than in Western European countries. Many national and international traders can be found in the Estonian Forex market. One of the main advantages of trading in Estonia is the geographic location and the time zone which makes it convenient to trade London and New York sessions without having to stay up late and wait for the NY market opening.
Small Population & Booming Forex Market
As we already said, the Forex market became popular worldwide, including Estonia. It is somewhat surprising that Estonia, a country with a population of approximately 1.300.000 has become a huge player in the market. On the other hand, the country’s economy appears to be stable, and stable economies produce more and more Forex lovers and investors. The small population was also probably one of the triggers why some Estonian Forex brokers expanded internationally. Some of the Forex brokers from Estonia reached international status with offices prevailing in Eastern Europe, in countries like Russia, Ukraine and Belarus, and even wider. Estonia cannot be considered a typical offshore Forex destination if we consider that it has its own brokers and companies which parallel international companies in quality and highly imposed standards.
MTR Registered Brokers
MTR registered brokers have to work according to the best practices and the highest industry standards. The success of the above-mentioned international brokers proves that Estonia does a good job when it comes to supervision of brokers. Some of the main criteria to obtain an MTR license are:
- sufficient capital to cover risks
- separate clients’ funds from the company’s operational funds
- submission of regular reports to and upon request of the Ministry of Economic Affairs and Communication
Top Estonian Forex Brokers
No one is allowed to run a Forex company from or within Estonia without an MTR license. All reputable brokers in Estonia already have an MDR license in their pockets keeping their business legit and under proper supervision. With Forex becoming very global, access to the best Forex brokers is possible form anywhere in the world. Top Estonian Forex brokers, either national or international, have, most probably, similar service packages and offers. You will get access to the same sophisticated features with any of them, under the condition that they are professional brokers without an intent to deceive their traders.