XM is a recommended forex broker. They operate in multiple strict regulatory environments and have a good regulatory record. They have very good protections in place for forex traders. They also have very competitive trading conditions, with some of the lowest transaction costs available. Of note is that they offer permanent demo accounts, which is of particular benefit for new traders.
Don’t open an account with XM before reading this.
XM is a forex broker founded in 2009. XM has grown steadily since that time to establish a global presence in the retail forex industry. XM is the trading name, and is owned by Trading Point, whose corporate headquarters are in Limassol, Cyprus. The company deals worldwide through its various wholly owned subsidiaries, with over 1,500,000 clients across almost every country in the world.
✅ Summary of Regulatory Status
XM is regulated as different companies in different regulatory regimes. The best choice of XM companies to open an account with depends on the preferred regulatory regime and the client’s country of residence. The country of residence may restrict which company can be used to open an account. The differences in regulatory regime may be very different from one company to the other, so it is important for the potential forex trader to read through the following to better understand how those differences can affect them. The of forex companies carrying the XM brand, and their regulator as described as follows, in order of preference:
- Trading Point of Financial Instruments UK Ltd is regulated in the UK by the Financial Conduct Authority (FCA), under Reference number 705428.
- Trading Point of Financial Instruments Ltd is regulated in Cyprus by the Cyprus Securities and Exchange Commission (CySEC), under license number 120/10.
- Trading Point of Financial Instruments Pty Ltd is regulated in Australia by the Australian Securities & Investments Commission (ASIC). They operate under the Australian Financial Services License number 443670.
- XM Global Limited is regulated in Belize by the International Financial Services Commission (IFSC), under license number IFSC/60/354/TS/17.
A comparison of how the different regulatory authorities compare for the XM offerings is as follows:
- The FCA is a highly reputable regulator
- FCA regulated brokers are subject to the Financial Ombudsman Service (FOS) for retail forex broker complaints. Any complaints should first be addressed through the broker’s own complaint resolution process. If the complaint is not resolved to the satisfaction of the forex broker, the complaint can be escalated to the FOS, where the FOS can force a resolution in favour of the trader if it is warranted. This is a powerful regulatory mechanism that makes dealing with an FCA regulated broker much safer than dealing with unregulated forex brokers.
- Clients of FCA regulated brokers benefit from the Financial Services Compensation Scheme (FSCS). The FSCS is a compensation fund of last resort, to protect customers against bankruptcies of their financial services company. In the unlikely event that the broker cannot return client money, clients may be eligible up to £50,000 of compensation from the FSCS. This protection applies to all clients of that forex broker, and the client does not need to be a citizen of the UK to qualify.
- Brokers who are regulated by CySEC must meet strict regulatory requirements. These requirements include provisions for:
- acting in the best interests of their clients
- accurately communicating the nature of the service and its associated risks
- maintaining accurate records
- taking reasonable measures to protect clients from risk from 3rd parties that the broker outsources services to
- safeguarding client funds and not commingling them with broker operating funds
- CySEC rigorously monitors forex brokers and does not hesitate to penalize them and revoke their licenses. There are few forex regulators who go after their forex brokers so aggressively.
- CySEC provides a financial ombudsman service to clients who have legitimate complaints against their broker
- CySEC regulated brokers are members of the Investor Compensation Fund For Customers Of Cypriot Investment Firms (ICF). In short, this is a fund designed to compensate clients of a forex broker, if that forex broker is unable to meet its financial obligations to its clients. A typical example would be if the forex broker goes bankrupt, the clients can recover their account balances via the fund. It is important to note that the maximum payout by the fund is EUR 20,000 per client.
- Brokers regulated by ASIC must publish a Product Disclosure Statement (PDS), and Financial Services Guide (FSG). These documents provide prospective clients with information that describes exactly what products and services they would be receiving in plain English instead of lawyer-speak. Included are detailed descriptions of the risks that clients are taking on. This is very useful because it provides additional transparency for clients of XM.
- Signing up for XM’s Australia company provides the additional benefit of the Financial Ombudsman Service (FOS). This service is provided by an independent third party to resolve complaints that clients have about their Australian forex broker. If a forex trader has a complaint, they must first attempt to resolve it with their broker. If the trader is unsatisfied with the outcome, they may make a complaint to the FOS. After hearing both sides, the FOS will issue a judgment, and this judgment is binding on the broker, if desired by the trader. This is an excellent mechanism to protect traders from any bad behavior by XM’s Australia company.
- Unfortunately, clients of XM’s Australia company do not receive special protection of their client funds in the event that XM in Australia goes bankrupt or is otherwise unable to return their client’s account balances.
- ASIC does keep an eye on their regulated brokers, and issues fines and penalties where necessary to brokers who violate the regulations.
- The IFSC is a weak forex regulator with a poor reputation compared to other forex regulators
- Forex Scam Alerts recommends against opening an account with an IFSC regulated broker
XM has had a regulatory warning from Japan and ASIC regarding soliciting clients without meeting all of the requirements for soliciting new clients in those countries. Forex Scam Alerts attributes this to “growing pains” associated with expanding and restructuring its business. These are of relatively minor concern vs the much more serious and harmful actions of other brokers reported elsewhere on this site.
The FCA is the most reputable forex regulator from the list above and offers what we think is the best protection for potential clients. As such, the remainder of this review will be for XM’s UK company that is regulated by the FCA. This company is Trading Point of Financial Instruments UK Ltd, which we will refer to as “XM”. Potential clients are advised to take care which of XM’s trading companies they are opening an account with, as trading conditions may vary from one XM company to the next.
✅ Counterparty Risk
Counterparty Risk is the risk a client takes on that is associated with their forex broker going bankrupt or otherwise not being able to return their funds to them.
XM is the counterparty for all forex trades placed by clients of XM. We assess the counterparty risk for XM to be low compared to other forex brokers, due to:
- All client money is segregated from the Company’s own funds and is kept with highly-rated banks in Europe.
- The FCA requires daily internal and external reconciliations to ensure the company keeps enough money in its client accounts to cover all client funds.
- If XM cannot pay back its client funds, clients can recover their account balances from the Financial Services Compensation Scheme (FSCS).
- XM has a strong track record, as evidenced by its survival during the SNB Swiss franc event of January 2015.
During the SNB Swiss franc event of January 2015, it was business as usual for XM. XM advised “the overall effect on the company’s business is immaterial. We remain financially strong, well-capitalized, at levels well in excess of global regulatory requirements”. This gives reasonable assurance that if XM managed past events so well, that they have a good chance of doing so when there is a similar event in the future. Other brokers went bankrupt during the SNB swiss franc event of 2015.
XM notes in its Risk Disclosure statement that the losses can never exceed the balance of your account, because of XM’s negative balance protection. This is important, as during the SNB Swiss franc event, many other forex brokers had clients with negative balances and some forex brokers took legal action against their clients to recover the shortfall. XM’s negative balance protection assures this will not happen to their clients.
✅ Broker Type
XM uses the market maker business model. This business model carries a higher risk because it puts XM in a greater conflict of interest vs other business models like straight through processing. In an unregulated business environment, this would be a huge red flag. However, for XM we are satisfied that this is less of an issue due to:
- The FCA has a lot of regulatory requirements in place to manage the risk from conflicts of interest
- To meet FCA requirements, XM has a public Conflict Of Interest Policy that has seeks to appropriately manage conflicts of interest
- To meet FCA requirements, XM has an Order Execution Policy for retail clients. This policy requires that XM takes all sufficient steps to achieve best execution of client orders. It is notable that XM has a symmetric slippage policy. This ensures that slippage can benefit the client as often has it hurts the client. Unregulated brokers often make a lot of money from asymmetric slippage policies, so it is significant that clients of XM are protected from this.
- XM has a dispute resolution process, and is subject to the Financial Ombudsman Service if a client believes XM has violated their policies
Additionally, the market make business model allows for the most rapid execution of trades, which is of greatest benefit to frequent traders.
XM offers great spreads. They offer a choice of price models depending on the account type. They have a standard account with an all-in spread with no added commission. The following shows a sample of spreads for major currency pairs for the standard account:
XM also offers an “XM Zero” account which offers even lower spreads with a fixed commission. The spreads can be as low as 0 pips, hence the name XM Zero, but they average higher than that depending on the currency pair. The commission charged is 3.5 USD per 100,000 USD traded. This commission is on par with commissions charged elsewhere. The low spreads and competitive commission make the XM Zero account transaction costs among the lowest in the retail forex industry.
The following are the spreads for the XM Zero account:
✅ Accounts and Funding
Clients of XM can fund their accounts using a wide variety of methods. XM UK options are a little more limited, but XM global limited offers a much wider choice. Options for XM UK include:
- wire transfers
- Electronic payment providers such as Neteller, Skrill, and others
- Credit / debit cards
Deposit fees are generally covered by XM. However, fees charged by the issuing bank must be paid by the client depositing funds. As an example, XM does not charge for receipt of bank wire transfers, but a client’s issuing bank typically charges the client to transmit the wire transfer.
Withdrawals can be done through most of the same options as for deposits, with some exceptions. Impressively, XM does not charge anything for withdrawals, regardless of withdrawal method. It is unusual to see this no fee policy applied so broadly, which means XM is covering a cost out of their own pocket in the name of good service.
XM allows for deposits and withdrawal of funds in a wide variety of currencies for most deposit methods, particularly the most popular ones. For example, wire transfers are accepted for: USD, EUR, GBP, JPY, CHF, AUD, RUB, PLN, HUF, SGD, ZAR.
Of particular importance to new traders is that XM offers demo accounts that do not expire. This is an unusual and important feature, as it can take months or years for a new trader to learn how to trade profitably. It is very important to have a chance to do this before risking real money. Please see our article on How To Start Trading Forex Safely to find out more about the importance of this.
XM offers a reasonable choice of trading platforms for traders, including the most well known and popular platform for forex trading. Options include:
- The classic MT4 platform in PC and Mac versions
- The newer MT5 trading platform, also in PC and Mac versions
- A web trading platform, which allows you to access your trading platform from anywhere with an internet browser
- MT4 or MT5 mobile trading platforms for iOS and Android operating systems
The following is an example of XM’s MT5 user interface:
Trading with XM offers the following additional features:
- Trade more than forex. You can also trade stocks, commodities, equity indices, precious metals, energies and cryptocurrencies
- Free access to market research and daily technical analysis
- Access to daily forex trading signals (we recommend caution with these)
Broker reviewed: XM
Review date: 2018-07-27
Rating out of 5: 5.0
Reviewed by: Forex Scam Alerts Google+