XM’s Safety – 5 Reasons Why XM is Trustworthy

What is a financial license?

A financial license is a permit required to operate a financial business, such as FX trading, and is issued by the financial authority of each country (in Japan, this is the Financial Services Agency). To obtain a financial license, a company must meet the regulatory criteria set by the authority, including capital requirements, management of customer assets, risk management systems, and more. The standards and difficulty of obtaining a license vary depending on the issuing authority, making it a key indicator of an FX broker’s safety and reliability. XM, in particular, has obtained a license from a highly rigorous regulator, making it a safe and fully legitimate overseas FX broker.

Segregated Funds Management System

Segregated management means that customer assets and the funds required for XM’s operations are held in separate bank accounts. This ensures that your funds are never used for company operations. XM is regulated by the Seychelles Financial Services Authority (FSA) and the Mauritius Financial Services Commission (FSC), and manages client assets safely in compliance with these licensing regulations.

Segregated Funds Management System

Comprehensive safety measures ensure that all deposits and profits remain secure.

XM uses a ‘segregated management’ system to safeguard customer assets. Client funds are held in reputable financial institutions within the EU and are completely separate from XM’s operating funds. To further ensure safety, XM conducts due diligence on these banks not only before deposits are made but also on a regular basis thereafter. Additionally, customer funds are not recorded on XM’s balance sheet, eliminating any risk that they could be used to pay creditors, even in the unlikely event of XM’s bankruptcy.

As a licensed entity with the Seychelles Financial Services Authority (FSA) and the Mauritius Financial Services Commission (FSC), XM is required to adhere to strict financial regulations. If an annual audit identifies any non-compliance in operations or fund management, XM’s internal audit firm reports all findings directly to the relevant licensing authorities.

The XM Group safeguards customer assets through segregated management and rigorous safety measures at reputable banks. All client funds, including deposits and profits, are securely managed, allowing you to use XM’s services with complete peace of mind, knowing your funds will never be used without your consent.

What is the Zero Cut System?

The zero-cut system is a mechanism where, if a loss cut (forced settlement) cannot be executed in time due to sudden price fluctuations and the resulting loss exceeds the account’s available margin, XM covers the loss and resets the negative balance to zero.

At domestic FX brokers, where balance compensation is not legally permitted, a negative effective margin can trigger a margin call, potentially leading to unexpectedly large debts. In contrast, many overseas FX brokers, including XM, use a zero-cut system that fully covers losses, ensuring you never fall into debt. Because losses cannot exceed your deposited funds, you can safely take advantage of XM’s signature high-leverage trading.

Conditions and Timing for the Zero-Cut System

XMTrading’s zero-cut system will immediately reset your account balance to zero if you make an additional deposit exceeding the minimum deposit to an account with negative equity, exchange XMP (XM Points) for USD, or transfer funds between accounts.

In principle, XM’s zero-cut system is triggered when you make an additional deposit. However, if you do not have any open positions, XM’s system may automatically reset a negative balance to zero even without a deposit. In such cases, the timing of the zero-cut execution may be irregular.