Forex & CFD Withdrawals: Speed vs. Safety – What Brokers Don’t Always Tell You
In the world of Forex and CFD trading, much of the marketing revolves around spreads, execution speed, leverage, and bonuses. But there’s one crucial topic that often stays under the radar - how brokers handle client withdrawals and where your money is actually held before it lands back in your bank account. We spoke to Fraser Nelson, Global Head of Business Development at Scope Markets to learn more.
The opening point to consider is that behind the scenes, where is your money before withdrawal? When traders request a withdrawal, they assume the process is simple: “Click withdraw → Broker processes → Money arrives in my account.”
But reality is more nuanced. As well as brokers covering the transfer fees, it also comes down to how and where brokers hold client funds before and after trades are settled. Two common operational models exist when it comes to withdrawal handling:
Model 1: Funds Kept with the PSP (Payment Service Provider)
Some brokers keep a significant portion of client funds sitting with the Payment Service Provider (PSP) rather than transferring them back to a segregated client account at a Tier 1 bank after each settlement cycle.
There are several reasons why brokers do this:
Faster withdrawals: Having funds parked with the PSP allows brokers to process withdrawals within minutes or hours.
Lower operational friction: Reduces the back-and-forth movement between bank accounts and PSP accounts.
Better for "instant withdrawal" marketing: Fast payouts are a major selling point in a competitive retail market.
The downside:
Increased counterparty risk: Funds sitting with a PSP are typically not covered by the same regulatory safeguards as segregated accounts in a Tier 1 bank.
Weaker insolvency protection: In case of broker failure, or if the PSP encounters issues, client funds could be harder to recover.
Potential regulatory gray areas: Some regulators frown upon brokers leaving large sums with PSPs for extended periods.
Model 2: Regular Fund Repatriation to Segregated Tier 1 Bank Accounts
Other brokers adopt a more conservative and regulation-aligned approach: After client deposits and trade settlements, funds are regularly repatriated back to segregated client trust accounts held with Tier 1 banks.
Why brokers do this:
Stronger client fund protection: Funds in segregated accounts are generally ring-fenced and safeguarded in the event of broker insolvency.
Alignment with regulatory expectations: Regulators (especially in the UK, Australia, and EU) prefer and often require brokers to minimise third-party risk.
Long-term trust building: This model attracts more institutional and high-net-worth traders who prioritise fund safety over ultra-fast withdrawals.
The trade-off:
Slower withdrawal times: It may take 24-48 hours (or longer) for funds to move from the segregated bank account, through the PSP, and finally to the client’s personal bank.
Higher operational costs for the broker: Regular fund reconciliation and settlement come with back-office and treasury costs.
The Emerging Middle Ground: Hybrid Models
Some brokers are now adopting hybrid treasury models, keeping a minimal float with PSPs for day-to-day withdrawals but regularly sweeping excess balances back to segregated bank accounts. This approach aims to balance speed with safety, though execution quality varies widely across the industry.
What do Introducing Brokers need to consider here?
For the trader, withdrawal speed is important—but fund safety should come ahead of this. So, before choosing a broker to partner with:
Check where client funds are held (ask for details beyond generic “segregated accounts” claims).
Review the broker’s regulatory jurisdiction and compensation schemes.
Ask directly about the broker’s withdrawal process and expected timelines.
Monitor your own withdrawal history and that of your clients: Do patterns of delays emerge?
A broker offering instant withdrawals sounds appealing—until something goes wrong. In a crisis, you’ll be thankful your funds were sitting in a Tier 1 bank and not languishing with a poorly capitalised PSP.
Security of funds is a subject we take incredibly seriously at Scope Markets and always discuss with our partner brokers how we are working to help them with this subject. Ultimately, we always want to build sustainable, long-term relationships and a key point here is communicating why occasionally processes might appear cumbersome, especially on matters of security. Talk to us to learn more how we support our partner brokers at every stage of their journey or click her to visit our Partner Registration.