What Happens If Your Forex Broker Goes Bust?

Broker failures are rare but not unusual. Understanding how past collapses played out shows which protections actually matter.

The Swiss franc shock, January 2015

When the Swiss National Bank removed its EUR/CHF floor, the franc surged within minutes. Alpari UK entered special administration within days; client money was protected by UK CASS rules and the FSCS for eligible clients, but the process took time. FXCM suffered losses of around US$225 million from client negative balances and needed an emergency loan from Leucadia. Global Brokers NZ and Cyprus-based Excel Markets closed. The event is the reason negative balance protection is now mandatory in major markets.

MF Global (2011) and Peregrine Financial (2012)

Both US futures firms failed with segregated customer funds missing — about US$1.6 billion at MF Global. Customers were eventually repaid largely in full at MF Global through a lengthy trustee process; Peregrine customers fared worse. These cases led US regulators to tighten segregation monitoring, including daily electronic confirmation of customer balances with banks.

What determines your outcome

1. Segregation quality — whether client money was properly ring-fenced and reconciled.
2. Insolvency regime — the UK's Special Administration Regime for investment banks prioritises returning client assets.
3. Compensation scheme — a backstop for shortfalls, subject to limits.
4. Jurisdiction — recovering funds from an offshore liquidation can be slow and expensive.

Practical precautions

• Don't keep more money at a broker than you need for margin
• Prefer entities with compensation schemes for larger balances
• Keep copies of statements and your client agreement
• Diversify across brokers if you trade large amounts

Our inactive brokers list records historical failures, exits and mergers.