Foreign exchange trading or in short, forex trading is gaining traction both in the local market and on the global front. This makes us wonder, what is forex trading in the first place?
Well, it’s not as complicated as one might think. Forex trading is basically the selling and buying of one currency for another.
For example, you may think the value of the US Dollar (USD) is likely to appreciate and would like to buy some with the Malaysian Ringgit (MYR) you have now. You may also sell your USD in exchange for another more favourable currency.
This simple form of transaction is forex trading.
Why forex trading isn’t recognised in Malaysia?
By now, many of you would have heard of forex trading either through colleagues, friends, families, social media or gurus. Some of you might have even attended seminars or classes on forex trading.
Yet, despite the rising awareness, if you actually try to ask around, you would, in fact, find that there are not a lot of people who are actually trading forex. Or worse, some of them might even ask you back if forex trading is even legal in Malaysia.
Well, it is legal, or at least it is to a certain extent.
For this purpose, we have to refer to the Exchange Control Act 1953 (ECA). The ECA states that it is indeed illegal for anyone to directly or indirectly participate in buying or selling of foreign currencies except with an authorised dealer.
In this case, indirectly means you cannot assist someone to buy or sell foreign currency as well.
I live in Malaysia, can I still trade forex?
For those who are now wondering, does that mean I cannot trade forex if I live in Malaysia? Not to worry, as was stated in the act, you can still trade forex as long as it is with an authorised dealer.
Bank Negara Malaysia (BNM) has kindly listed for us the authorised financial institutions with which we can engage to trade forex. These institutions are considered authorised dealers as defined by ECA and regulators.
Here is the list of authorised financial institutions. You can click on the link to learn more:
Is an authorised financial institution the only option?
At this point, some of you may recall seeing advertisements on social media or the internet promoting trading platforms or brokers which offer forex trading services.
So, can we really use them to trade? The answer is, yes.
Investing with an overseas institution is legal in Malaysia. It is legal in the sense that forex trading through these foreign brokers is considered foreign investment, which is permitted under Malaysian laws.
However, being able to legally trade forex through foreign institutions is different from the case of whether the foreign brokers are legally allowed to operate in Malaysia.
Let’s make this clear. To be able to operate a forex trading platform in Malaysia, a foreign broker or institution will have to first obtain approval from the Securities Commission Malaysia (SCM). SCM is a statutory body entrusted with the responsibility of regulating and systematically developing the capital markets in Malaysia.
This leads us to another problem, how do I know if the foreign broker is authorised?
Fret not. You can always do a quick check on SCM’s website on whether the foreign forex brokers are licensed to operate in Malaysia. No one wants to be a victim of a scam and losing their hard-earned money to scammers. By doing so, you can verify the authenticity of the forex broker and prevent yourself from falling into a potential scam.
Which one should I pick?
Enough with the technicality for now, let’s get to the interesting part, who should you choose?
There are many forex broker platforms out there. For starters, we should look for foreign brokers that are well regulated by the relevant authorities.
Recommendation by trusted regulatory bodies such as Financial Conduct Authority (FCA), European Securities and Markets Authority (ESMA) or Australian Securities and Investment Commission (ASIC) should be one of your main criteria in selecting a forex broker.
Here are some top forex brokers recommended by these bodies:
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FxPro (Website)
FxPro is well established in the forex trading scene for its trustworthiness and reliability.
In addition, FxPro offers its user a wide range of desktop trading platforms, including MetaTrader 4, MetaTrader 5, cTrader and FxPro Edge. FxPro also has its app available in both iOS and Android for ease of trading, accommodating the growing smartphone users.
Of course, we cannot miss out on highlighting FxPro top-notch customer support given that it prides itself on being a “five‑star customer service,” specifically its multilingual, 24‑hour Monday‑through‑Friday (24/5) customer service team.
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Pepperstone (Website)
Pepperstone is another industry leader among other forex brokers.
This is because Pepperstone offers its users one of the most comprehensive forex trading experiences among its peers. This comprehensive forex trading experience is all enabled by Pepperstone’s extremely fast execution systems, multiple account types, competitive pricing and multiple platforms (MT4 and MT5, and full cTrader functionality).
As for Pepperstone customer support, not to worry, its customer support has received a lot of positive feedback from its users and is very reliable.
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OctaFX (Website)
OctaFX is another solid forex broker in the industry, just the fact that it has offices in 6 major cities in the world including Kuala Lumpur speaks volume of its popularity and its growth.
OctaFX’s platform is incredibly versatile supporting MT4, MT5 and cTrader functionalities. They also frequently hold giveaway contests with laptops, gadgets and even scooters as prizes!
Recognising the importance of social copytrading and how this is growing in the industry, OctaFX has allowed the customer access to copytrade other traders. If you’re keen on trading by yourself, they have state-of-the-art “Autochartist” analytical tools to ease your research.
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Plus500 (Website)
Similar to XTB, Plus500 is also publicly listed but on the London Stock Exchange instead. If you have not heard of it, the London Stock Exchange is one of the biggest stock exchanges in the world.
Plus500 offers its users in more than 50 countries access to its forex trading platform. Plus500 spreads are also very competitive, which keeps costs low and the proprietary WebTrader platform is intuitively functional.
As for customer support, it may not be the best but does have all the necessary contact options if you encounter some kind of error.
Do background check
The forex brokers referenced in this article are just a few honourable mentions. With the internet at your fingertips, you should always conduct a background check on these brokers before committing to ensure they are trustworthy.
One of the ways would be through the websites of relevant authorities and regulatory bodies that we mentioned above.
These websites keep an updated list of banned forex brokers and the latest illegal investment schemes that you may want to steer clear of in your journey of investing.
Key takeaways
- Like share trading, forex trading is just another means of investment, albeit in a more volatile market.
- It is legal to trade through foreign forex broker where the investment would be deemed a foreign investment.
- It is always vital for you to do a health check on the brokers before signing up with them to trade for your own safety. Better safe than sorry!
Through this article, we hope you understand a little more about the legality of forex trading in Malaysia and how you can distinguish between an illegal forex dealer and a legal one.
All the best to you on your trading journey!
Now that you know forex trading is legal in Malaysia, would you give it a try? Share with us your thoughts and remember to sign up with us to get more insights on forex trading!