The Ultimate Guide to
Best Online Brokers for Portugal
Portugal’s financial services sector has an extensive history dating back to its empire in the 1500s. Despite Portugal’s small size, the country’s relatively high population of 10.3 million and its strategic location within the European Union (EU) offers numerous opportunities for foreign investors.
The primary stock exchange in Portugal is Euronext Lisbon. It was formed in 2002 when shares of the Bolsa de Valores de Lisboa e Porto (BVLP) were purchased by the Amsterdam based Euronext N.V. to create one of the biggest European financial exchanges. In addition to listing Portuguese equities and equity derivatives such as warrants, Euronext Lisbon also lists private, public and participation bonds. Additionally, the Portuguese exchange lists investment unit trusts and exchange-traded funds (ETFs).
The main stock index for Euronext Lisbon is the PSI All-Share Index which includes all shares listed on the official market. Moreover, the narrower blue-chip PSI-20 Index tracks prices of twenty stocks with the highest market cap and turnover in the PSI Geral, the Lisbon exchange’s general stock market.
A part of the European Union, Portugal’s currency is the euro (EUR), managed by the European Central Bank (ECB). According to data compiled by the Bank for International Settlements (BIS), an international organization that aims to promote financial cooperation by fostering collaboration between central banks, in 2016 the euro was ranked as the 2nd most actively traded currency that year. It was also involved in roughly 31.4% of overall forex turnover in 2016. The International Monetary Fund (IMF) also ranked the euro second among the most popular currencies held by central banks as reserves in third quarter of 2018, composing around 19% of their total reserves.
The primary Portuguese financial sector regulator is the Portuguese Securities Market Commission or Comissão do Mercado de Valores Mobiliários (CMVM) that oversees participants in both the stock and forex markets. This strict regulator aims to supervise and regulate transactions in securities and other financial instruments and the activities of any operating in those markets. The CMVM also handles complaints and ensures compliance with the EU’s Markets in Financial Instruments Directive (MiFID) regulations. Any non-EU financial institution or online broker must be authorised by the CMVM before operating in Portugal, while EU brokers can cater to Portuguese residents through the provisions of the European Economic Area (EEA) initiative.
How to Trade in Portugal
Portuguese traders are able to access numerous reputable online forex brokers located in the EU. Alternatively, traders living in Portugal may also deposit funds as a margin to trade online with any non-EU broker. Most online brokers offering forex or derivative trading brokers who trade in contracts for a difference (CFDs) will accept Portuguese clients. That being said, using a broker registered in Portugal and subsequently in EU, would typically be preferable as they will be regulated both by the CMVM and other European regulatory agencies.
If it is necessary to have a broker’s customer support services and website available in Portuguese, then it is advisable to verify that the broker can cater for this language need prior to opening an account with them. Nevertheless, if a non-EU broker seems to offer better products or services it is important to always verify if the broker is strictly regulated in the jurisdiction under which it operates.
Moreover, when looking at online brokers, it may be worth considering a broker’s free demo account. Many online brokers now offer these demo accounts equipped with virtual money traders to allow for the testing of the brokers services, strategies and even to practice trading.
In relation to trading stocks, Euronext Lisbon provides a fair and transparent market in several asset classes, as well as in Portuguese equities and derivatives. Trades on all Euronext exchanges will generally be executed in Euros. Each of the Euronext stock and derivatives exchanges employs the UTP trading software, but by November 2019 this is being replaced with the Optiq multi-market trading platform. Another interesting feature, is that Euronext has a Single Order Book that allows for traders to trade, clear and settle from over all Euronext markets uniformly.
Biggest Opportunities of Trading in Portugal
As a member of the EU, Portugal’s ports and borders allow the free flow of trade with other EU members, and it uses the common euro currency for all its transactions as a member of the Eurozone.
Portugal’s political stability and democratically elected parliamentary government also welcomes foreign investment and business.
According to export.gov, the country offers additional opportunities for businesses as follows:
- Although Portugal’s population is just over 10 million, the number of people who speak Portuguese in the world numbers more than 230 million, which could open additional markets outside of the EU.
- The Portuguese Business Promotion Agency (AICEP) markets Portugal as a “gateway” country due to its language ties to its former colonies, such as Mozambique, Angola, Macau, Lusophone and most notably Brazil.
- Portugal serves as an excellent point of entry to the European market. It has a stable government, a low crime rate and incentives to foreign businesses that make Portugal an excellent choice to begin doing business in Europe.
- The country has well developed information technology (IT) and physical infrastructures that reduce the cost of doing business in Portugal, which is already among the lowest in Europe.
With respect to trading across borders, Portugal reached the top ranking among the countries surveyed by the World Bank. Portugal also ranked 16th when it comes to resolving insolvencies and 34th for ease of doing business overall.
Biggest Challenges of Trading in Portugal
According to the World Bank Group, the nations that represent Portugal’s closest trading partners include Germany, Spain, France, the UK, Italy, the Netherlands and the United States. Moreover, the geo-political actions from major worldwide players such as the United States, China and the UK could both directly and indirectly impact the EU’s financial markets. According to the World Bank, Portugal’s ratio of trade to GDP numbers in 2017 was 42.7%, which could be viewed as some resilience to trade disruptions.
Moreover, the World Bank ranked Portugal at 112th in obtaining credit, although the country scored higher in 64th place for protecting minority investors rights, 60th for dealing with construction permits and 57th for starting a business.
Summary
Overall, traders and businesses will find Portugal a relatively secure place to operate. This is particularly due to Portugal’s participation in the EU’s common market and use of the stable Euro, in addition to their positive ranking by the World Bank for trading across borders. Furthermore, Portuguese financial institutions are strictly overseen by the CMVM and must comply with the EU’s MiFID regulations.
When reviewing the choices for an online broker to use to trade from Portugal with, traders should check that their asset classes are sufficient and that they have strict regulatory oversight, a good client reputation and a trading platform that has all the necessary features. Moreover, any acceptable broker should keep client funds segregated from its own to offer a safe place for a margin deposit.
