Forex Trading in Malaysia and IBFC Forex Brokers
It hasn’t always been possible for Malaysian consumers to participate in Forex trading, as it was actually considered to be an illegal type of investment. If you’re looking for Forex brokers in Malaysia now though, things are looking up. No longer do you have to worry about spending time in jail, and there are a number of IBFC-regulated brokers to choose from. One of the ways this has been made possible is by the creation of a special free trade zone by the Malaysian government, which is considered to be one of the biggest in Asia.
The Labuan IBFC – a Malaysian free trade zone
The Labuan International Business and Financial Center is a special economic zone which was created by the Malaysian government in 1990. It is based on the island of Labuan, which lies off the Borneo coast. Such an excellent location provides the centre with a unique position for tapping Asian investment opportunities. It shares a common timezone with a number of larger Asian cities, is located between India and China, and is in close proximity to a few other financial centres. The Malaysian government has designated it as a financial centre and a free trade zone.
Why the IBFC is a popular location for Forex brokers in Malaysia
Aside from its great location there are a number of other reasons brokers are choosing to set up on the island rather than the Malaysian mainland. Business set-up costs are much lower than on the mainland, and there is a lower tax structure for investors. Its close proximity to a number of other emerging powers is also a valid reason for the location being very attractive. It does, however, face competition from locations such as Singapore and Hong Kong.
There are currently more than 7,000 firms that are operating in the Labuan IBFC, including financial institutions, businesses, and IBFC-regulated brokers. It is now considered to be one of the fastest-growing free trade zones in the world.
As Malaysia is a largely Muslim country, mainland trading operations have to comply with Sharia law. There is, however, a more liberal approach to such forms of investment as Forex trading, which allows Forex brokers in Malaysia to offer services to a much wider audience because they have a recognised licence. There are also numerous privileges and advantages an IBFC regulated broker is able to benefit from, making trading conditions very favourable indeed.
The regulation of IBFC Forex brokers
The regulatory authority in the Labuan International Business and Financial Center is left to the LFSA (Labuan Financial Services Authority). All IBFC brokers and financial services providers have to be licensed, and are regulated by the LFSA. You won’t have to worry because the imposed standards are in line with recognised global regulations, including minimum capital requirements and operational compliance.
In 1996, the Labuan Financial Services Authority Act was passed, and the LFSA was created. It was tasked with developing and managing the IBFC. Its aims are as follows:
- To promote and develop the island of Labuan as an international financial services and business centre
- To develop objectives, priorities, and procedures that are in keeping with national ideals in relation to the administration of business and financial services and their systematic development
- To act as the central regulator, supervisor, and enforcement authority for international financial and business services.
The Labuan Financial Services Authority is responsible for regulating and licensing all LFSA entities, and ensuring that they conduct business in a fair and transparent manner.
Is Forex trading in Malaysia a sensible option?
If you happen to be a Forex broker looking to set up a base of operations in the Labuan IBFC, you will be pleased to learn that the authority has one of the fastest turnarounds of any regulatory agency. Currently, it can take as little as 2 months for the incorporation of an IBFC brokerage firm. To further improve trader confidence and trust, IBFC Forex brokers are able to work with major banks for the purpose of segregating client funds. Forex brokers in Malaysia are encouraged to ensure that the STP (Straight-Through Processing) trading model is used, adding further confidence, as brokers are prevented from being the counterparty to trades. This is a pretty unique situation.
The IBFC has been actively promoted as a worthwhile and exciting location for offshore investment since 2008, and has consistently improved its reputation. There are an increasing number of mainstream providers setting up a base of operations in the free trade zone, because it is an excellent location from which to target the fast-growing Asian market; but there is still a little way to go for the authority to reach the heights of better-known agencies such as the FCA. It is also still trying to overcome negative reports into its efficiency.
Why you should pick an IBFC-regulated forex broker
The consensus of opinion among trading experts is to always try and pick a regulated broker, as this will probably be the most reliable and safest choice. Brokers will entice you with all types of offers, promotions, and bonuses; but the first and most important consideration should be whether the financial services provider is regulated. Scam brokers are renowned for promising you the earth. You’ll be given amazing and unbelievable percentages for return on investment – so good you’ll no doubt be wondering whether they are too good to be true. If things go wrong, though, you aren’t protected in any way, and you’ll have no one to go to to recover your losses.
When you’re looking for a Forex broker in Malaysia, your best bet will be to find one that is licensed and regulated by the IBFC. This type of broker will also have a good reputation, and your investment will be better protected. A regulated broker will have your best interests at heart. Don’t choose an unregulated broker, as often the only goal for this type of broker is to take all your money and give very little in return.