A Guide to Forex Trading in Indonesia, and BAPPEBTI Forex Brokers
Forex trading, in terms of volume, is the largest market in the world. It includes all aspects of exchanging, buying and selling of currencies at determined or current prices. The main players in this market are large international banks. However, the introduction of online Forex trading has led to a number of ordinary individuals having a reasonable level of success in this form of investment. It has increased in popularity over the years, and it is now possible to trade Forex from almost anywhere in the world. If you live in Indonesia and are considering a Forex venture, you should learn as much as you can, especially with regard to BAPPEBTI-regulated brokers.
What is BAPPEBTI, and how does it help Forex brokers in Indonesia?
BAPPEBTI refers to an agency that was launched in 2005 to regulate certain sections of the financial services industry in Indonesia. It stands for Badan Pengawas Perdagangan Berjangka Komoditi, or the Indonesian Commodities and Futures Trading Regulatory Authority. It is the only agency with regulatory responsibility for various financial institutions. It operates under the supervision of the Indonesian Ministry of Finance and is managed by a board of administrators, all of whom are selected by the government from industry experts.
Indonesia was not the first country to seize the opportunities made available by Forex trading, but it is catching on very quickly, with the number of BAPPEBTI Forex brokers increasing exponentially. It is now possible for Indonesian traders to trade a number of different products being offered by both local and international companies.
When this type of trading first became popular, brokers regulated by BAPPEBTI generally only offered commodities and futures trading, and only a very small number offered trading in foreign currencies. This meant that an increasing number of international firms were targeting Indonesian investors. Alongside the legitimate brokers, there were also a number that turned out to be scams, and Indonesian clients were suffering significant losses.
2013 saw the Indonesian government take regulation of the financial services industry more seriously. The actions included a number of Forex brokers and their platforms being banned.
How things are now for traders and BAPPEBTI regulated brokers
Following the overhaul of the regulatory framework in 2013, the government started to keep a closer eye on the financial services industry. One of its aims was to eradicate financial scams completely, because so many Indonesian investors had fallen victim. To help the general public become aware of existing scams and complaints, a website called TRUST+ was set up. Via the website, consumers in Indonesia were able to learn about and understand the risk of being caught out by fraudulent practices.
A further development came when BAPPEBTI Forex brokers began offering tailor-made financial services for the Indonesian market, but the choice remained very limited for traders. The government therefore decided to open the doors for overseas brokers to operate in Indonesia, with the proviso that they complied with local rules and regulations. The ban was lifted on international Forex brokers operating in Indonesia, and you now have a much wider choice. However, the official advice is still to only choose a BAPPEBTI-regulated broker.
How BAPPEBTI regulated brokers operate in accordance with Sharia law
BAPPEBTI Forex brokers have to operate in accordance with Sharia law, as the country is predominantly Muslim. Forex trading and Sharia law is an emotive subject, but suffice it to say, it can be offered with specially designed Sharia-compliant accounts. There are certain prohibited features:
- No interest or riba to be earned or paid
- No excessive risk or gharar
- No speculation or gambling.
Is there a complaints procedure in relation to BAPPEBTI-regulated brokers?
Many of the better-known and more experienced regulatory bodies include the need for regulated entities to have a clear complaints procedure, and for the agency to offer its assistance whenever possible. As the regulatory framework in Indonesia is still relatively new, BAPPEBTI currently offers no assistance to traders who fall foul of a scam. However, it’s not all bad news, because the Indonesian regulator is taking its responsibilities very seriously, and it shouldn’t be too long before it falls into line with other agencies.
What does the future hold for Indonesian Forex traders?
The idea of setting up a base of operations in Indonesia is still not high on the agenda for many mainstream Forex brokers. Many of them are choosing to stay away from the country because there are a number of negative factors. There is still no formal set of guidelines for financial companies to comply with, leaving the business environment in an unstable state. It can also be very expensive to set up a business in Indonesia, making it difficult for newcomers to recoup their invested capital via a retail trading business. Another reason for the lack of new brokers is the extremely high Indonesian business tax.
That being said, there are still a few brokers who have made the move and gained an advantageous position in the country; but you should also be made aware of the fact that there are a number of unlicensed or unregulated brokers offering their services, and the advice is to steer well clear of them. You will have the best protection for your investment if you choose a BAPPEBTI-regulated broker.
As the regulatory system for the financial services sector is still in its infancy you can be sure things will only get better. There will be an increasing number of regulated entities offering their services, and the rules and regulations will get much tighter. It is also possible there will be a standard complaints procedure introduced, which should give you even more peace of mind. Keep your eye on the financial news and keeping popping back here, because we will do our best to keep you informed.