Due to the high liquidity, ease of access and an abundance of opportunities, over the years there has been an increasing number of Malaysian retail investors looking to trade foreign exchange markets (Forex). But as with any financial product, it is always good to make sure that you thoroughly understand what you are getting yourself into before you start trading. So this article will explain whether Forex trading is legal in Malaysia and if so, under what regulations?
Forex trading is legal in Malaysia. Trading is regulated by the Securities Commission Malaysia (SC) under the Capital Markets and Services Act 2007 (CMSA) which came into effect on 1 December 2007. This allows traders to take positions on any currency pair, using a broker regulated by the SC.
Forex Trading In Malaysia – The Law
Forex trading is completely legal in Malaysia and is regulated by the SC under the CMSA. Brokers and dealers trading in forex products need to be registered with The Securities Commission Malaysia (SC) under the Capital Markets & Services Act 2007 (CM&S Act).
As forex trading is legal in Malaysia, traders must adhere to certain rules and regulations in order to keep this status. In Malaysia, the central bank is the authority that regulates forex trading. This means that any brokers operating from Malaysia must be approved by Bank Negara Malaysia (BNM).
There are much stricter rules for brokers then there are for traders. Traders are able to trade with any broker around the world and have access to leverage up to 1:500. Leverage is extremely risky for traders so you must be cautious when using it.
As Islam is very prominent in Malaysia, it is important to trade with a swap free account or ‘Islamic account’. There are many forex brokers such as IC Markets that provide Islamic accounts so that Malaysian traders can trade Forex without worrying about interest and without violating any religious boundaries.
Do Forex Traders In Malaysia Pay Tax?
We are not able to give out tax advice, but we can tell you that forex trading in Malaysia is not considered a form of gambling and therefore taxation is required.
Forex trading is legal in Malaysia, but there are strict rules to go with it. It would be wise to speak with your local tax accountant to get advice on how much you would need to pay to stay compliant.
Typically, forex trading is only tax free in countries where it is considered gambling, rather than investing.
Are Malaysian Based Traders Allowed To Trade With Any Forex Broker?
Even though forex trading is legal in Malaysia with brokers that are approved by the central bank, there are always risks involved when it comes to choosing a forex broker to work with. Forex traders should be aware of these risks before they decide to start investing their money in such a risky and volatile market. If you’re looking for a forex broker to trade with, I’d recommend checking out this handy list of brokers.
Many traders in Malaysia choose to trade with unregulated brokers and offshore brokers . This is not necessarily a bad thing, but it can lead to some problems. Once you have made the decision to trade with an offshore regulated broker, it is important that you do your research before deciding which one is right for you.
What are the Risks Involved For Malaysian Retail Investors Trading With Unregulated Brokers?
As there are no regulations or requirements for offshore brokers, it is possible to trade with a broker that is not safe and does not have your best interests at heart.
It is not uncommon for traders in Malaysia to be scammed by these unregulated brokers. There are numerous Forex frauds that take place every year where investors lose their investments due to no fault of their own. This can take place by way of the broker just stealing capital, or even manipulating spreads, prices and trades to cause losses.
Most of the unregulated brokers are B-book, meaning they trade against clients . This usually leads to manipulation of the market and you could find yourself in a losing position before opening an account with one. It is therefore always advisable to find out more about a broker before deciding whether or not to open an account with them.
Can Forex Traders In Malaysia Trade Any Currency Pairs?
Forex trading is legal in Malaysia and luckily, the currency pairs are not limited either. This means that traders are able to make use of any pair their brokers offer, including EURUSD and GBPUSD or even minor pairs like EURCHF and GBPNZD.
When choosing what currency pairs to trade, it’s important to bare in mind which currency pairs have the highest volume and number of opportunities.
Which Forex Pairs Are The Most Popular In Malaysia?
The most popular currency pairs in Malaysia are EURUSD, GBPUSD and AUDUSD . These pairs have a high volume of trades daily which provide ample opportunities for traders to profit from. Unfortunately, these pairs typically require at least 10:1 leverage while most other currency pairs have a much lower requirement. Luckily for us though, the majority of brokers operating in Malaysia will offer at least 10:1 leverage, with offshore brokers offering much more!
In Conclusion – Forex Trading In Malaysia Is Legal
In summary, forex trading in Malaysia is completely legal and regulated. While trading is open and available to all Malaysian residents, forex trading with unregulated brokers could land you in way over your head and result in a lot of problems for new traders. Therefore, always make sure that the broker you choose fully complies with local laws and has been around for a significant amount of time.
If you have any experience trading in Malaysia, please do leave a comment down below – I’d be curious to hear your experience!