Located in Southeast Asia, Malaysia has recently seen a growth of people’s interest in the forex industry. The country has gained popularity quickly for being a country with an emerging market economy in this content. Not too long ago, forex trading was considered illegal, and offenders were sent to jail. Fortunately, things are different now, and new forex traders can take part in trading without the threat of punishments. However, with a rapid change, unscrupulous elements are also attracted easily inside the country. Inexperienced people become the victim of frauds easily. It is not necessary to be the same with forex trading, but you can protect yourself from unknown risks better by knowing the legalities and regulations about forex trading in Malaysia in detail.
Is Trading Forex Legal in Malaysia?
Yes, forex trading is indeed legal in Malaysia. In 2012, a statement was released by Bank Negara Malaysia that said that traders can buy and sell foreign currencies in the country through licensed investment banks, commercial banks, Islamic banks, and international Islamic banks. Of course, traders can also go for forex brokers. There are many offshore brokers that offer their services to Malaysian traders. Forex is not quite regulated in the country, but it is not illegal either. However, if you want to use trading platforms of these brokers, you need to be aware about a few rules.
- The Exchange Control Act of 1953
General restrictions are imposed on forex dealings by both residents and non-residents, according to this Act. However, it does not restrict non-residents to buy ringgit assets in Malaysia, like securities and land property. Non-residents are also allowed to transfer all profits, foreign currencies, divestment proceeds, and returns abroad from the investment they do in Malaysia.
- The Securities Commission Act of 1993
This Act allowed the Securities Commission Malaysia to take care about forex dealings in securities. From that point onwards, the commission has been licensing and regulating securities dealings.
- The Money Changing Act of 1998
The regulation and licensing of money-changing business are provided by this Act. For instance, a trader that is licensed under the Exchange Control Act of 1953 is allowed to purchase and sell foreign currencies that are licensed under the Money Changing Act of 1998.
Regulatory Bodies for Forex Trading in Malaysia
If you want to start trading forex in Malaysia, and want to know about the regulations, there are some agencies, institutions, financial bodies, and commissions you may refer to, such as –
Bank Negara Malaysia
Founded in January 26, 1959, Bank Negara Malaysia is the central bank of Malaysia. The main purpose of this bank is to issue currency, as well as act as adviser and banker to the Government of the country. It also regulates the financial institutions, monetary policy, and credit system of the country.Securities Commission of Malaysia
Securities Commission of Malaysia regulates businesses dealing with securities in the country. It supervises exchanges, approves corporate bond issues, monitors central depositories, and regulates mergers and acquisitions of businesses, and futures contracts and securities.
Finance Accreditation Agency (FAA)
Incorporated in August 2012, FAA develops higher learning standards. At the same time, it also spearheads the certification and standardization efforts for the industry of the financial services. Its activities are monitored by Bank Negara Malaysia.
Malaysian Investment Development Authority (MIDA)
MIDA is the principal agency of the Malaysian Government. Its job is to oversee and drive investment in the countries services and manufacturing sectors. The institution also outlines how money-changing businesses and retail forex traders must conduct themselves in the country.
Shariah Advisory Council (SAC)
SAC has the authority to ascertain Islamic law for takaful business, Islamic banking business, Islamic development financial business, Islamic financial business, and other businesses based on Shariah principles, and regulated and supervised by Bank Negara Malaysia.
How to Trade Forex in Malaysia?
Now that you have some idea about the legalities of forex trading Malaysia, you can proceed to place your first trade by following some simple steps –
- 1. Select a currency pair
Forex trading is all about trading the value of a currency with another. It means that you will have to purchase a currency and sell another at the same time. So, you need to trade currencies in pair. New traders generally start their journey with the major currency pairs. However, it is your call to make.
- 2. Analyze the market
Just like stock trading, forex trading requires an in-depth research and analysis of the market. The market is always full of different currency pairs, but do not feel overwhelmed by them. Since there are a lot of currencies, make sure to research on the currency pair well you want to trade. To do this, you can view historical and current charts, and keep yourself updated with latest economic news and announcements. You also need to conduct fundamental and technical analysis.
- 3. Understand the quote
Since forex trading involves trading a currency pair, you will see that each currency has two values. The difference between the first value and the second value is known as the spread. It is the amount that is charged by a dealer to place the trade. Based on the dealer, spreads may vary.
- 4. Choose a buy or a sell position
You can open a buy position if you think that the price of the currency is likely to rise compared to the quote currency. If you are purchasing MYRUSD, you are predicting that the value of the Ringgit is going to strengthen against the US dollar. Here, the Ringgit is a bullish currency, and the US dollar is bearish.
A sell position is the opposite. You can open it when you think that the price of the base currency is going to fall compared to the quote currency. If you are selling MYRUSD, you are predicting that the value of the Ringgit is going to weaken against the US dollar. In this case, the US dollar is bullish and the Ringgit is bearish.
How to Open a Forex Trading Account in Malaysia?
Opening a forex trading account with a broker in Malaysia is straight-forward and easy if these steps are followed accordingly –
- Visit the website of the broker and view the types of accounts available. You may come across Micro accounts for beginners, ECN accounts for advanced traders, swap-free Islamic accounts for Muslim clients, and more.
- Now, complete the registration process by providing personal details including name, address, phone number, Email, date of birth, country, and ID number. Once done, you can set a password for your new account. When the registration is done, you will be provided with the credentials to log in to the account.
- Verification process is the next. To complete this, log in to the client portal of the broker and upload necessary documents there. You may upload your passport, government issued ID, and a utility bill to verify your identification and address.
- Now, you can fund your trading account with money. The transaction can be initiated through bank wire transfer, credit cards, and electronic wallets like WebMoney, Neteller, PerfectMoney, FasaPay, and Skrill.
Once your account is funded, you are ready to start trading forex with it.
Conclusion
Keep in mind that the most important rule in trading is to be aware all the time. Forex trading in Malaysia is still a new concept. To trade safely, you must find a trustworthy broker first. You must make sure to check if the broker is regulated by top-tier financial bodies. The more strict authorities regulate a broker, the more protection it provides to the clients’ funds because it needs to follow those regulations. It would also be a wise decision to study local legislation and be up to date about trading in Malaysia.