Forex Trading In Malaysia With The Best Malaysian Forex Brokers
Malaysia is fast developing into an investor-friendly nation that has started adopting different financial products and services to become a global market player in the Forex industry. Not so long ago, Forex trading used to be an illegal activity in Malaysia, which could have led to imprisonment and hefty fines for traders indulging in such activities without consent from the relevant authorities. Malaysia is predominantly a Muslim nation that has more than 60% of its population following Islamic laws and associated religious beliefs, making it one of the prime contenders for an Islamic trading account. Forex trading, in general, has several aspects that are in direct contradiction to Sharia laws, which prevents Islamic traders from investing in any FX related trading activities through direct means.
However, with the introduction of Sharia-compliant accounts into the Forex trading market, the top Malaysian Forex brokers have started to offer customized brokerage accounts that fully comply with all the Islamic rules of trading. Malaysia is also known to have the largest generation of smart investors within its vast population, which does present an attractive opportunity for Forex brokers to tap into the tremendous potential of the Malaysian financial markets.
Malaysia is not as famous as their neighboring Singapore, which is considered as a global financial hub, but the country has started to incorporate various economic policies that are aimed at improving the overall feasibility of conducting business in the region. Malaysia derives its primary revenue through oil, and unlike its Singapore counterpart, does not possess a financial market of an international caliber. Any investor that wishes to set up a company in Asia will always prefer Singapore, due to its global appeal and excellent regulatory framework that supports both the business, as well as its consumers.
Forex trading is still a restricted activity in Malaysia, regardless of the recent surge in popularity of the FX markets in the country. The Ringgit, which is the native Malaysian currency, is highly regulated by the central bank of Malaysia, thereby preventing speculators from betting on the rise or fall of the currency to a greater extent. Nevertheless, Malaysian Forex traders may indulge in FX trading for other currencies, provided that they adhere to all the laws imposed by the Malaysian authorities from time to time.
How Does The Bank Negara Regulate The Best Forex Brokers Malaysia?
The Bank Negara, also known as the Central Bank of Malaysia, is the sole authority that regulates and monitors the Ringgit in the currency markets. The Bank Negara has several fiscal policies and internal regulations that supervise the movement of the country’s core currency, in order to prevent any unexpected volatility in the markets. Therefore, the Ringgit is certainly one of the most carefully supervised currencies in the Forex market, making it highly reserved for a few large Government organizations and a select few individuals that are authorized to trade the Ringgit by the Government authorities.
On the other hand, the Malaysian financial markets are regulated by the Securities Commission of Malaysia, which oversees the activities of almost all financial companies that are a part of the Malaysian capital markets. Stock trading in Malaysia follows all the Sharia rules of trading, which makes it a perfect investment opportunity for residents. However, Forex trading is an entirely different market that has its own standards and concepts that are different from any local markets. Forex trading is largely unregulated in the global markets, which requires local agencies and their respective Governments to take care of regulating the trading activities to ensure that traders are not subjected to any financial scams or fraudulent activities.
Since Malaysia is new to the world of Forex and CFD trading, there isn’t a single devoted regulatory organization that is responsible for monitoring the activities of Forex brokers in Malaysia. That being said, the Bank Negara does have several policies that are implemented on FX brokers to curb a majority of financial scams that are prominent in the financial markets. Traders also receive some amount of protection against broker malpractices, but there is still room for considerable improvement. Traders should not compare Malaysian FX brokers to brokers from other countries, especially when it comes to protection of funds and the overall trading environment. Therefore, it is up to a trader to make a wise decision by choosing a Forex broker that is both safe and secure as far as their trading career is concerned.
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As A Trader From Malaysia, What Are My Options?
To choose the best Forex brokers in Malaysia, you should be willing to spend some sizeable amount of time towards researching the different choices in the market. Quite often, you may end up choosing an overseas company, but you should only choose a broker that can guarantee the safety of your funds. In order to help our readers make the right choice with their Malaysian FX brokers’ research, we have devised the following checklist:
- Regulation – Immaterial of your choice of a broker or their location, you should always make it a priority to choose a regulated Forex broker. Quite preferably, you may pick a Forex broker that is regulated by top regulatory organizations such as those from the US, the UK, the EU, Australia, Japan, or the neighboring Singapore, which should provide you with an excellent trading environment that is devoid of broker malpractices. Choosing a broker near you should offer you an upper hand while receiving timely support. Alternatively, brokers from the US and EU should also provide you the most reliable services, but the choice is entirely up to your personal preferences.
- Selection of Trading Account – Brokers are known to offer different types of trading accounts according to the geographic location. Asian and European FX brokers tend to offer smaller trading accounts with lower minimum capital requirements, while brokers from the US have higher trading capital requirements and several restrictions on trading. Therefore, your choice of FX broker should be able to offer you a trading account that suits your preferences, rather than spending extra time and resources into conforming to a broker’s account specifications.
- Availability of SWAP-free Islamic Trading Accounts – Since a majority of traders from Malaysia follow Islamic ideals and beliefs, most brokers offer exclusive SWAP-free accounts for their Malaysian clients. If you are Muslim trader that is looking for a Sharia-compliant account, consult with your broker about their Islamic trading account offerings.
- Speed Of Payments – For any trader, the ultimate goal is to make consistent profits from their Forex trading ventures. A reliable Forex broker will always ensure that you can access your profits and make a withdrawal without any restrictions. It will take a while to find a Forex trading company that facilitates easy and secure payments, but by choosing a regulated company, you can eliminate any worries about the security of your funds.
- Performance Of Trading Platforms & Trading Products – A trading platform is the vital link between you and the markets; therefore, you should concentrate on finding the best performing trading platforms that have consistent reliability and top performance. A few seconds can determine the outcome of a trade, which requires a trader to choose a reliable trading platform for their trading needs.
Currently, overseas Forex brokers are concentrating their efforts on expanding to lesser-known Asian countries, and are setting up branch offices and satellite ventures in Malaysia to serve traders across the Asia-Pacific. These satellite offices are established either through dedicated company establishments or through affiliates and introducing brokers. The Malaysian authorities have also relaxed their regulatory requirements for Forex trading in the country, which has helped companies to offer legal and approved FX brokerage services Malaysian investors without any legal backlash.
However, some brokers may take undue advantage of such an opportunity by indulging in scam practices, which may trick users into depositing money into an account that the broker may use for other purposes. Since Malaysia doesn’t have any advanced regulatory guidelines or proactive investigative approach, most of these scams go unnoticed, which can result in millions of dollars in losses for unfortunate traders. Hence, it is up to a trader to be vigilant against such brokers by carefully analyzing their options and by doing extensive research before investing their money in the markets.
Why Is FX Trading Frowned Upon By Malaysian Authorities?
Malaysia had been at the pinnacle of speculative currency trading during the 1980s and the early 1990s, under the Bank Negara’s then existing Governor, Jaffar Hussein. However, due to the over speculation of the Bank Negara and its impact on the currency markets, the US Government’s Federal Reserve intervened by asking the Malaysian Central Bank to minimize the extent of its speculative activities. Regardless, the Central Bank continued with its massive speculation, until the fateful Black Wednesday, which saw the British pound being devalued against all other major currencies in the world. The Bank Negara had initially bought massive amounts of GBP in anticipation of appreciation in its value, particularly against the positions held by the infamous speculator George Soros, which saw it losing billions of dollars after the market crash. Due to the severe extent of the losses incurred by the Central Bank in such a deal, and further speculative losses in subsequent years, saw the Bank Negara being rendered technically insolvent in 1994.
Due to depleted currency reserves, the Bank Negara had to be bailed out by the Malaysian Finance Ministry, which further banned all speculative activities on the currency markets. The present situation is largely attributed to the huge speculative losses incurred by the Central Bank of Malaysia, but the country is slowly starting to accept the Forex market as a valid investment option once again.