TOPIC 7

FOREIGN EX C HA NGE MA RK ET ( IN
MA LAYSIA )
Disclaimer: This presentation is for educational purposes only.
Opinions or points of view expressed in this presentation
represent the view of the presenter and does not necessarily
represent the official position or policies of the financial
institutions in Malaysia.

2
 FOREIGN EXCHANGE (FOREX) MARKET

• FOREIGN EXC HANGE MARKET

• MALAYSIAN FOREX MARKET

Presentation title 3
 FOREIGN EXCHANGE (FOREX) MARKET

T he f o re x market is t he w o rld 's la rg e s t and mo s t liq uid

f inanc ial market w it h t rad ing e x c e e d ing U S D 2b d aily.
Fo r e x is a g lo ba li ze d de c e n tr a lize d m a r k e tpla c e w h e r e
c u r re nc ie s a r o u n d th e w o r ld a r e tr a de d. I t de te r min e s th e
pr ic e a n d e x c h an ge r a te o f e ve r y c u r r e n c y in th e w o r ld.
I n th is m a r k e t, pe o ple bu y a n d se ll c u r r e nc ie s a s a n
a sse t, by e x c h a n gin g th e m f o r o n e a n o the r . T he f o re x
mar ke t is an i mp o rt ant c o mp o ne nt in any nat io n’s
c ap it al m arke t s inc e it b ro ug ht a li nk between
d o me s t ic c ap it al market and g lo b al c ap it al marke t s .

U n lik e o th e r f in a n c ia l m a r k e ts, f o r e x m a r k e t do e s n o t
h a ve a pa r tic u la r lo c a tio n for a ll th e f in a nc ia l
tr a n sa c tio n s . I t is a s tr e a m o f n e tw o r k s f o r me d by a l l i ts
pa r tic ipa n ts, su c h a s ba n k s a n d f in a n c ia l in sti tu tio n s,
br o k e r s a n d r e ta il tr a de r s . M e a n in g, a ll f o re x o c c ur o v e r
c o mp ut e r net w o rks .

4
 CONTINUE...

Most financial transactions in the forex market

are done using the OTC system, which means
that the buyers and sellers will conduct their
transactions directly in the market without any
supervision from an exchange or a liquidity
provider.

The forex market is a market that is seldomly sleeps.

It is essentially a system that involves different
parties from various nations. From the United States
and Europe to Asia, you can find any market open at
any time on weekdays.

5
 MALAYSIAN FOREX MARKET

T he Ma l ay si an for e x m ar ke t i s ope n an d a cce ssi b le th r ou g h i ts l a rg e n e tw or k of li ce nse d on sh ore

b a n k s, or vi a Ap p oin ted Ov e r sea s Offi ce s (A OO) of th ose b a n k s. Cu r r en tly, th e re a re 1 63 A OOs
fr om 2 1 b a n ki ng g r oup s op er a tin g in 3 5 coun tr ie s th a t en a bl e n on - re si de n t s to u nde r ta ke for e x
tr a n sa cti on s i n v ol v i n g r i n g g i t d i r e ctl y ov e r se a s.

F or e x i n com e i s ta xa b le i n Ma l ay si a a s i n com e ta x, bu t for e x ca p i ta l g ai n s a r e e xemp t fr om t a x.

T h i s me a n s th a t i f y ou tr a de wi th a sw a p- fr ee I sl am i c a ccou n t a nd a re he ld to n ot b e d e ri vi ng an
i n com e fr om y ou r tr a d i n g , a n y g a i n sh ou l d b e t a x- fr e e .

Appointed Overseas Offices (AOO) Counterparties Primary Market Makers

The AOO serves to facilitate wider Counterparties comprise all the Building from the notable progress
price availability and enhance licensed onshore banks in Malaysia, of the AOO Pilot Program, in terms
liquidity of ringgit FX transactions both local and foreign banks, custodian of improving investors' access to
outside the Malaysian trading banks both local custodians and global the ringgit market, particularly
hours. Pilot AOOs publish the custodians as well as international during London and New York
USD/MYR spot reference prices via central securities depositories that can trading hours, the structure was
major platforms after the Malaysian be approached by investors for access transitioned to a permanent
trading hours. to the Malaysian financial market, arrangement with Pilot AOOs
apart from the Appointed Overseas appointed as Primary Market
Offices (AOOs) available globally to Makers.
facilitate investors.
Source: Bank Negara Malaysia 6
 LAW & REGULATIONS ON FOREX TRADING

• LEGALITY ON FOREX TRADING IN

MALAYSIA

• ISLAMIC RULINGS ON FOREX

TRADING

• FOREX LAWS & REGULATIONS

• INSTITUTIONS, B ODIES,
AGENC IES, & C OMMISSIONS
REGULATING FOREX TRADING

Presentation title 7
 LEGALITY ON FOREX TRADING IN MALAYSIA

Bank Negara Malaysia wishes to inform the As for Muslims, to trade Forex in Malaysia in a
public that buying and selling of foreign legal way is to use one of the approved
currency in Malaysia is only allowed with institutions or brokers and maintain an Islamic
licensed commercial banks, Islamic banks, account. A broker or agent must be deemed to
investment banks and international Islamic be Shariah-compliant.
banks as provided for under the Exchange
Control Act 1953. Such trading is also Some shariah-compliant brokers that have
allowed with licensed money services received good reviews by users worldwide are
business providers or money changers as AvaTrade, eToro, FXTM, and markets.com.
provided for under the Money Services Before you start investing, be sure to compare
Business Act 2011. your forex brokers and figure out which one is
approved by Malaysia’s regulators.
The list of authorized dealers and financial
institutions permitted by the Controller of Note: BNM warned consumers that OctaFX is not
Foreign Exchange to buy or sell foreign authorised nor approved under the relevant laws and
currency can be obtained from Bank Negara regulations administered by BNM. The Securities
Malaysia's website. Commission Malaysia had also announced that it had
added OctaFX to its investor alert list in June this year.

8
 ISLAMIC RULINGS ON FOREX TRADING

NATI O NA L FATWA CO UNCI L SHA RIA H A D V ISORY C OU NC IL OF B NM

T he r u l in g Ru li ng s a g a i n st for e x by th e T he Cou n ci l has a l re a dy h ad th e ir

Na ti on a l Fa tw a Cou n ci l i s t h a t fore ig n r e sol u ti on on thi s m a tte r, w hi ch i s: “Bu yi ng
e xch a ng e tr a di ng i s for b id de n, a nd th i s
a n d se l li ng of for e i g n cu r r en cy i n Ma la y sia
r u l i n g i s b i n d i n g for Mu sl i m s i n th e cou n tr y.
for Mu sl i m s i s on l y a l l ow ed w i t h l i ce n sed
T he b an on for e x tr ad i ng am ong Mu sl im s i s com me r ci al b a nk s, l i ce n sed I sla mi c
i n r e fe re n ce to th e b a n on for e x tr a d in g
fi n a n ci a l i n sti tu ti on s, i nve stme n t b a nk s a nd
sch e me by in d iv id u al sp ot for e x via
e l e ctr on i c p l a tfor m w h i ch i s a g a i n st th e l a w. i n te rn a ti ona l I sla mi c b a n k s a s p r ovi de d for
u n de r th e Excha n ge Con tr ol A ct 1 9 53 ”
How e ve r, oth e r form s of tr a di ng i n fore ig n u n d e r sp e ci fi c r e q u i r e m en ts a n d con d i ti on s.
cu r r e n ci e s, su ch a s b y m oney ch a ng e r s or
b e twe en b a nk s, w e re pe rm i ssi b le , a s th ey
h ttp s: //w w w.m ay b an k. com /i sl ami c /e n /coe
d o n ot i n v olve cu r r en cy sp e cul a ti on or
u n ce r ta i n ou tcom e s. /fa tw a /oth e r s /for e x_ th r ou g h_ el e ctr oni c_ pl
a tfor m . p a g e

https://www.bnm.gov.my/documents/20124///cc360560-5c03-ba6f-63eb-9605e4c12250/
 FOREX LAWS & REGULATIONS

The Exchange Control Act of 1953 The Securities Commission Act The Money Changing Act of 1998
of 1993
The Act imposes general This Act is mainly concerned with the
restrictions on foreign exchange This Act gives powers to the licensing and regulation of any
dealings by residents and non- Securities Commission Malaysia, money-changing business by the
residents. There are no to license and regulate responsible commission. This is the
restrictions for non-residents to businesses dealing in securities. act that outlines the regulations
invest in Malaysia to purchase that forex brokers who wish to
ringgit assets, such as land Capital Market Services Act 2007 operate in Malaysia should strictly
property and securities. This Act regulates and provides abide by. It is this act that also
for matters relating to the outlines that the Foreign Exchange
There is also no restriction for activities, markets and trade is not regulated directly by
non-residents to transfer abroad, intermediaries in the capital Bank Negara Malaya. The central
in foreign currency, all profits, bank, BNM, regulates the Malaysian
markets. It also provides for all
returns and divestment proceeds companies involved in the Ringgit and issue licenses to money-
from their investments in securities and derivatives changing businesses without
Malaysia. markets and covers all Forex & regulating the trade itself.
CFD brokers.

Forex platforms, traders and brokers are advised to comply with these rules and regulations while trading.
Meanwhile, the Foreign exchange control (FEC) in Malaysia is governed by the Exchange Control Act, 1953. The
Controller of Foreign Exchange is the Governor of Bank Negara of Malaysia (BNM) who also acts as the foreign
exchange dealings regulator in Malaysia.
10
 INSTITUTIONS, BODIES, AGENCIES & COMMISSIONS
REGULATING FOREX TRADING

1. Bank Negara Malaysia (BNM)

▪ Controls all matters concerning the Malaysian currency and advises the government on the financial stand of the
economy. It is actively involved in all foreign exchange trading related activities in Malaysia.
2. Malaysian Investment Development Authority (MIDA)
▪ Outlines how money-changing businesses should conduct themselves in Malaysia including retail Forex traders.
The MIDA has clearly expounded on issues of investing in foreign assets, borrowing in ringgit, borrowing in foreign
currency and opening foreign currency accounts.
3. Securities Commission of Malaysia
▪ The body that regulates businesses that deal with securities in Malaysia. Its functions are supervision of
exchanges, central depositories, approving corporate bond issues, regulation of all matters relating to securities
and futures contracts, and regulation of the mergers and acquisitions of companies.
4. Finance Accreditation Agency (FAA)
▪ Established by the SC & BNM in 2013, it acts as an independent quality assurance and accreditation body for the
financial services industry, under the guidance of BNM.
5. Shariah Advisory Council
▪ It is the authority for the ascertainment of Islamic law for Islamic banking business, takaful business, Islamic
financial business, Islamic development financial business, or any other business, which is based on Shariah
principles and is supervised and regulated by BNM.
11
 FOREX TRADING & INVESTMENT

• BNM CO NNE CTI O N WI TH FO R E X

MA R K E T

• BNM FO R E I GN E XCHA NGE

A D MI NI STR ATI O N ( FE A ) PO L I CY

• FE A – BNM NOTI CE S O N R E SI D E NTS

A ND NO N - R E SI D E NTS

Presentation title 12
 BNM CONNECTION WITH FOREX MARKET

As the banker and adviser to the Government, Bank Negara Malaysia provides advice on
macroeconomic policies and the management of public debt. Bank Negara Malaysia is also the sole
authority in issuing the national currency and in managing the country's international reserves.

The Bank Negara Malaysia was a major player in the forex market in the late 1980s. The activities of
the bank, under Governor Jaffar Hussein, caught the attention of Forex players across the globe. It
wasn’t long before the influence the Bank Negara had on the direction of the forex market was
substantial. The BNM was requested to stop trading when the Federal Reserve’s chairman realized the
impact of its speculation.

Over the following few years, BNM sold large quantities of some of its currency reserves and ended up
being technically insolvent in 1994. Luckily, it was bailed out by the Malaysian Finance Ministry.

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 FOREIGN EXCHANGE ADMINISTRATION (FEA) POLICY

Malaysia continues to maintain liberal foreign In March 2021, Bank Negara Malaysia (BNM) is
exchange policies, which are part of broad pleased to announce further liberalization of
prudential toolkits to maintain monetary and foreign exchange policy (FEP) which provides
financial stability. BNM is committed in ensuring greater flexibilities to businesses as part of our
the policy continues to support competitiveness continued efforts to strengthen Malaysia’s position
of the economy through facilitation of a more in the global supply chain and to foster a
conducive environment for cross-border real conducive environment in attracting foreign direct
economic activities. investment (FDI) into Malaysia.
https://www.bnm.gov.my/-/liberalisation-of-
Bank Negara Malaysia (BNM) Foreign Exchange foreign-exchange-policy-2021
Administration (FEA) Policy are prudential
measures to accelerate the development of The gradual liberalization process over the recent
Malaysian financial market and to promote years has been consistent with Malaysia’s stronger
financial stability. Depending on the residency external position and a more resilient financial
status and whether one has domestic ringgit market. Therefore, these measures will provide
borrowing / financing, undertaking of greater flexibilities to the export-oriented
investment abroad and investment in foreign industries to better support the economic recovery.
currency asset onshore may have limit imposed.
All policies applicable can be obtained from:
https://www.bnm.gov.my/financialmarkets/fxpoli
cy
14
 FEA - BNM NOTICES ON RESIDENTS

A resident without domestic ringgit borrowing is free to invest any amount in

foreign currency (FC) assets onshore and abroad.
A resident with domestic ringgit borrowing is free to invest:
• Up to RM1 million equivalent in aggregate per calendar year on individual
basis; or
• Up to RM50 million equivalent per calendar year in aggregate on corporate
group basis (include resident entities within the group with parent-
subsidiary relationship),
sourced from conversion of ringgit and Trade FCA.
A licensed onshore bank, a licensed insurer or licensed takaful operator is free
to invest abroad for its own account.
INVESTING IN FOREIGN
CURRENCY ASSETS A resident licensed unit trust companies, entity offering collective investment
schemes including closed-end funds, fund managers or licensed insurer is free
to invest abroad on behalf of their resident or non-resident client as follows:
• Up to 100% of Net Asset Value (NAV) or total funds belonging to resident
client without domestic ringgit borrowing and non-resident client in
conventional and Shariah compliant assets; or
• Up to 50% of NAV or total funds belonging to a resident client with domestic
ringgit borrowing in conventional assets.
A licensed takaful operator is free to undertake investment abroad up to 100%
of the NAV of ringgit or FC-denominated investment-linked funds belonging to
their clients. 15
 FEA - BNM NOTICES ON RESIDENTS

A resident entity is free to borrow any amount in foreign currency (FC) from:
(i) Licensed onshore banks, (ii) Resident or non-resident entities within
its group of entities, (iii) Resident or non-resident direct shareholders, (iv)
Another resident through issuance of FC debt securities

A resident entity may borrow in FC up to a prudential limit of RM100 million

equivalent in aggregate from non-resident financial institutions and other
unrelated non-residents, including through issuance of securities or Islamic
securities denominated in FC.

By resident individual
FC BORROWING IN A resident individual, sole proprietor or general partnership may obtain up to a
M’SIA & FROM ABROAD limit of RM10 million equivalent in aggregate from licensed onshore banks and
non-residents other than immediate family members.

16
 FEA - BNM NOTICES ON RESIDENTS

Resident entity is free to borrow:

• Any amount of ringgit to finance real sector activities in Malaysia from
either non-resident entity within its group or non-resident direct
shareholder;
• Up to RM1 million in aggregate from any other non-resident, other than
a non-resident financial institution, for use in Malaysia; and
• Any amount through issuance of tradable securities or redeemable
preference shares (RPS) denominated in ringgit to non-resident for use
in Malaysia.

RINGGIT BORROWING By resident individual

FROM NON-RESIDENT Resident individual is free to borrow:
• Any amount of ringgit from non-resident immediate family member; and
• Up to RM1 million in aggregate from other non-resident, other than a
non-resident financial institution for use in Malaysia.

17
 FEA - BNM NOTICES ON RESIDENTS

A resident is free to buy or sell ringgit against foreign currency (FC) with a
licensed onshore bank (excluding international Islamic banks) on spot or
forward basis for current and financial account transactions either on firm
commitment or anticipatory basis.
A resident is free to cancel or unwind their existing forward position involving
ringgit for any underlying commitment (except portfolio investment) with any
licensed onshore bank.
Under Dynamic Hedging Framework, a resident institutional investor
registered with BNM is free to enter into forward contracts to buy ringgit up
to 100% of its invested underlying FC-denominated asset or unwind the
forward contracts entered, without documentary evidence with a licensed
onshore bank, for the purpose of managing its FC exposure. The unwinding of
its initial forward contract can be undertaken with the same or different
BUYING AND SELLING
counterparty licensed onshore bank it has entered the initial forward contract
OF FX
with.
A resident is also free to hedge non-FX derivative contracts offered by a
resident provider up to the net open position (NOP) of the FX exposure with
any licensed onshore bank. The resident is required to unwind the forward
position if it exceeds the NOP.
A resident entity is free to undertake the FX transactions above on behalf of
the resident and non-resident within its group of entities (excluding financial
institutions).
18
 FEA - BNM NOTICES ON NON-RESIDENTS

A non-resident investor is free to:

• undertake any type of investment in ringgit asset or foreign currency (FC)
asset in Malaysia (direct or portfolio investment) without any restriction;
• open a ringgit account or FC account (FCA) with a licensed onshore bank.
The funds are free to be remitted into and out of such accounts, subject to
normal due diligence process by the licensed onshore bank; and
• repatriate divestment proceeds, profits, dividends or any income arising
from the investments in Malaysia. Repatriation shall be made in FC.

INVESTING IN
MALAYSIA

19
 FEA - BNM NOTICES ON NON-RESIDENTS

Non-residents may borrow in foreign currency or in ringgit from any onshore bank
subject to limit and purpose.
Borrowing in foreign currency
A non-resident entity is free to obtain foreign currency (FC) borrowing from any
licensed onshore bank to use in or outside Malaysia.
A non-resident is free to issue FC-denominated sukuk or bonds in Malaysia for use
in or outside Malaysia.
Borrowing in ringgit
A non-resident other than financial institution is free to borrow in ringgit:
1. Any amount from any resident (including a licensed onshore bank) to finance or
refinance real sector activities in Malaysia.
2. Any amount from immediate family members for any purpose;
BORROWING IN M’SIA 3. Any amount from an employer in Malaysia under the employment terms and
conditions for use in Malaysia;
4. Any amount of margin financing from:
1. a resident stock-broking corporation; or
2. a licensed onshore bank with stockbroking license
to purchase securities or financial instruments traded on Bursa Malaysia; or
5. Up to attained cash surrender value of any life insurance policy or family takaful
certificate purchased from licensed insurer or a licensed takaful operator.
A non-resident custodian bank or non-resident stock broking corporation is free to
obtain overdraft facilities from a licensed onshore banks to facilitate settlement of
shares or ringgit instruments due to inadvertent delay of payment by the non-
resident to avoid settlement failure. 20
 FEA - BNM NOTICES ON NON-RESIDENTS

Any non-resident will find the Malaysian financial market is easily accessible and open through
its large network of licensed onshore banks. Non-resident can also undertake FX transactions
involving ringgit directly overseas via the Appointed Overseas Offices (AOO) of the licensed
onshore banks.
A non-resident may undertake the following FX transactions via a licensed onshore bank or an
AOO:

FX transaction for own account

• Buy or sell foreign currency (FC) against ringgit on spot basis for any purpose.
• Buy or sell FC against ringgit on forward basis based on underlying obligation. A ringgit
derivatives contract other than exchange rate derivatives, offered by a resident provider is
considered as part of underlying obligation. There is also no restriction to unwind or cancel
BUYING AND SELLING the forward transaction for any underlying commitment (except portfolio investment).
OF FX FX transaction on behalf
• A non-resident entity to enter FX transactions involving ringgit (spot or forward basis) on
behalf of resident and non-resident entity within its group of entities.
• A non-resident institutional investor (NRII), including custodian/trust bank, to enter into
FX transactions involving ringgit on behalf of its non-resident clients. The NRII may also
participate in the Dynamic Hedging Framework to actively manage its ringgit FX exposure.
• A non-resident financial institution to enter FX transactions involving ringgit on behalf of
its non-resident clients for settlement of international trade in goods or services with a
resident.

Apart from FX transactions, a non-resident entity (with or without underlying) and a non-
resident financial institution (with underlying) may also trade ringgit-denominated interest
rate derivative with a licensed onshore bank or an AOO. 21
 ISSUES IN FOREX TRADING

• FOREX SC AM

• ILLEGAL FOREX TRADING SC HEME

• ILLEGAL FOREX B ROKERS

• FOREX – A GAMB LING GAME

Presentation title 22
 FOREX SCAM

Forex scam operators usually operate on a Once lured by fraudsters, investors can either
small scale and claim they can provide services trade using their trading accounts with the
efficiently, without the need for any documents company or through dealers appointed by the
or identification. They rarely use documents to company. They are required to sign a business
validate and verify the transactions. By contract which is normally entered between the
engaging in these transactions, customers run investors and a principal company
the risk of being cheated and their funds may overseas. However, such contracts are usually
never reach its intended destination. left unsigned. If investors are unhappy with
the dealings and transactions, no action can be
Forex scammers usually target job seekers by taken against the company as there is no
placing attractive advertisements to lure binding contract between them.
prospective employees to join the company,
after which they use them to solicit for new Even though investors will usually get high
investments. Most often, employees will be returns on their initial investments,
encouraged to approach their direct family, eventually, they will end up losing
relatives and friends before targeting members everything when the illegal operators suddenly
of the public. go missing.

23
 ILLEGAL FOREX TRADING SCHEME

A s a t ra der/ in ves t o r, you sh o u ld bew a re

Th e bu yin g o r sellin g o f f oreign c u rren c y
o f “o ver-t h e-m o o n” c la im s a n d a lwa ys
by a n in dividu a l o r a c om pa n y in
loo k o u t f or a sc a m sign , i. e., :
Ma la ysia w ith an y pers o n wh o is n ot a
lic en sed o n s h o re ba n k o r an y pers o n w h o 1 . C om pa n ies, h ea dqu a rt ers, a n d ba n k
h a s n ot o bt a in ed t h e a pprova l of B a nk a c c ou nt s t ha t a re regis t er ed in
Nega ra Ma la ysia is c on sidere d a n illega l c ou n t ries w h ere t h e ba n k in g ru les a n d
f oreign ex c h a n ge t ra din g sc h em e. t a x regim e a re lo o s ely c on t rolled.
2 . Sc a m m ers th at requ ire yo u r ba n k
Th is s c h em e in volves t h e a c t o f bu yin g det a ils a n d sign at u res, bu t t h eir side o f
o r borrow in g f oreign c u rren c ies f ro m o r pa perw ork a n d sign a t u res a re u n c lea r.
sellin g o r len din g f or eign c u rren c ies t o a 3 . A dem on st rat ion t h at is m ost lik ely w it h
n on -lic en sed on sh ore ba n k . fake t ran sa ct ion s in a c ont rolled
en viron m en t a n d n ot on th e rea l, o pen ,
c u rren c y m a rk et s, wh ere rea l ris k s
It c an a lso be in t h e sit ua t ion wh ere t h e ex ist , and pro f it s a re fa r f ro m
n on -lic en sed on sh ore ba n k does a n a ct gu a ra n t eed.
t h at in volves, is in a s s o c iat io n w ith , o r is 4 . Fa k e t est im on ia ls and pic tu res of
prepa ra t ory t o, bu yin g o r bo rrow in g people w it h h u ge a m ou nt s of c a s h or
f oreign c u rren c ies f rom , o r sellin g o r lu x u ry it em s .
len din g f oreign c u rr en c ies t o , a n y person 5 . Th e sc a mm ers t h at pa you t t h e f irst
ou t side Ma la ysia . ret u rn o n a sm a ll in vest m ent a s a ba it
t o get you t o a gree t o a la rger
in vest m en t . 24
 ILLEGAL FOREX BROKERS

Fo rex brok ers may be opera t in g Wh ile n o a rres t s h a ve been m a de, t h e

illega lly if t h ey a re n ot lic en sed an d SC has a nn ou n c ed th at th es e
regist er ed by the S ec u rit ies c o m pa n ies a re viola t in g Ma la ysia ’s
C o m m issio n Ma la ysia ( SC ) . A t t h e s am e C a pit a l Ma rk et s an d Servic es A c t 2 00 7
t im e, th e SC h a d tu rn ed a blin d eye t o a n d, if c on vict ed, c o m pa n y
Ma la ysia n Fo rex t ra ders u sin g o ff s h o re repr es en t a t ives c o u ld be im prison ed
bro k ers t o t ra de Fo rex an d ot h er a n d h ea vily f in ed.
C o n t ra c t f or D if f eren c es ( C FD s ) .
Spec if ic a lly, t h e SC h a s wa rn ed t ha t
B u t sin c e 2 02 0 t h e SC h a s st a rt ed t h es e bro k ers a re ‘c a rryin g ou t o f t h e
issu in g w a rn in gs a ga in s t f orex brok ers u n lic en s ed c a pit a l m a rk et a c t ivit ies o f
o pera t in g w it h o u t a lo c a l lic en se. Ma n y dea lin g sec u rit ies’, a n d ‘op era t in g a
respec t ed a n d ot h erw ise w ell-regu la t ed rec o gn ize d m a rk et w it h ou t
bro k ers h a ve seen w a rn in gs issu ed a u t h o riza t io n f ro m t h e SC M.
a ga in st t h em , in c lu din g eToro ,
Ho t Fo rex , FX TM, Tic k m ill, Oa n da ,
Oc t a FX a n d FB S.

25
 FOREX – A GAMBLING GAME

F or e x i s one of t h e m ore p op ul a r wa y s for B a se d on re se a r che s, 9 5% of F or e x tr a de r s

Ma l a y sia n s t o i n ve st or e a r n e xtr a i n com e. a r e n e t l oser s of m on e y. Mor e t h a n 80 % of
How e ve r, m an y p e op l e fa il ed a nd w en t tr a de r s fa i l a n d q ui t . I t i s a pa i n ful
b a n kr u p t i n the F or e x Ma r ke t b e cau se th ey e xpe r ie n ce for th e tr a n si ti on of ca r e e r for
“g a m b l e ” t h e i r ca p i ta l . som e one w h o h a s a l r e a dy comm i tted t im e,
m one y a n d e ffor t i n t he wa y of d eve l opi ng
W h en tr a di n g F ore x, the r e a re a l ot of F or e x tr ad in g k n owl ed ge a n d sk i l l s (to th e
tr a de r s w h o a p pr oa ch th i s fu l l - fle dg ed e xte n t t h a t a cqu i ri n g su ch sk i ll s i s e v en
b u si ne ss a s i f i t w e re a ga mb le , an d of p ossi b l e ) w he n the p r ofi t th a t t h ey d e sir ed
cou r se , th i s d oe s n ot b od e w el l . I t m ay for a r e n ot m a te r ia l iz ed . Th e on ly p e op le
se em t h a t F ore x t r a di n g an d g amb l in g h ave m a ki ng m oney r el i ab ly i n th i s fi e ld a re
a l ot in comm on. I n b ot h ca se s, i t i s m a in ly tr a d in g p la t for m s th a t tak e comm i ssi on s fr om
a b ou t g am e s w i th p r ob a bi l i ty (th e m ore th e tr ad e s y ou p l a ce an d pe op le w h o se ll
th ey pu sh the i r l u ck, the m or e m on ey th ey cou r se s i n F or e x tr a d i n g .
l ose ).
F or e x w or ld i s v e ry com p le x a n d h a s fu l l of
W h en y ou sta r t tr a di n g fore x, y ou w i ll sp e cu l a tor s. I f t he l aw s a l l owe d t o d o so, one
i mme d ia te ly be a b le t o a cce ss a m a r g in sh ou l d imp ose a 10 0% ta x on p r ofi ts i n F ore x
a ccou n t, w h i ch a l l ow s y ou t o l eve r ag e, tr a d in g so t h a t al l spe cu l a tor s a re d riv e n ou t
w h i ch i s a r i sk i e r w ay to a cq u i r e l ar ge r of th e m a r ke t a nd a l l wh o r em a i n ar e a ctor s
fu n d in g. T hi s ca n b e a tem p ta ti on of ta k i ng th a t h av e pr a cti ca l ne ed s for cu r r e n cy
l a r g e r p osi ti on w i th g r e a t e r r i sk s e xp osu r e . e xch a n g e a n d p r i ce h e d g i n g .
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 ENFORCEMENT ACTION AND
FRAMEWORK

• B NM ENFORC EMENT AC TION

AGAINST ILLEGAL FX TRADING

• BNM MINIMUM DUE

DILIGENCE (MDD) GUIDE FOR
FOREIGN EXCHANGE (FE)
RULES – PUBLIC’S VERSION

Presentation title 27
 BNM ENFORCEMENT ACTION ON ILLEGAL FX TRADING

B NM h a s th e a u th ori ty to ta ke form a l B NM h a s a l so e sta b l i sh e d th e Sp e cia l

e n for cem en t a cti on s ag a i n st an y p er son I nv e stig a ti on s Unit (S IU ) in 19 8 6 to
who fa i l to com p ly w i th re g ul a tor y con d u ct su r ve i ll a n ce a n d inv e st ig a te i l le ga l
sta n d a rd s a n d oth e r re q ui r eme n ts i ssu e d fi n a n ci a l sch em e s. Th i s U n i t, n ow e xp a nd ed
p u r su an t to t he la w s t he Bank a n d k n ow n a s F i na n ci al I n te ll i ge n ce &
a dm i ni ste r s. En for ceme n t a cti on s i mp ose d En for ce me n t De p a r tm en t (F I ED ), e sse n t ia l ly
b y B NM in cl ud i ng cr im i n al , civ il a n d con d u cts se a r ch a n d sei z ur e ope r a ti on s,
a dm i ni str a tiv e a cti on s h av e an im p or ta n t a n d i n te r vi ew of w i tn e sse s t o g a t h e r
r ol e in pr ovi d in g cre di bl e d e te r re n ce p e r tin e n t i n form a ti on tow ar d s su cce ssfu l
a g a in st n on - comp li a n ce as we ll as p r ose cu ti on of offe n d e r s.
e n su r in g pu bl i c con fi d e n ce i n the i n te g ri ty
of th e fi n a n ci a l sy ste m . B e si de s, the B NM d oe s m a in ta in cl ose
w or k i ng r e l a ti on sh ip s w i th th e A ttorn ey
Pu r su a n t to th e F i n an ci a l S e rv i ce s A ct G e ne r al ' s Ch am be r s a n d oth er e n for ceme n t
2 0 1 3 an d I sl am i c F i na n ci al S e rv i ce s A ct a g en ci e s su ch a s th e P ol i s D i Ra ja Ma la y si a,
2 0 1 3, a ny p e r son i nv olve d i n il l eg a l CCM, Coop er a tiv e s C omm i ssi on of Ma l a y si a,
for e i gn cu r re n cy tra d in g sh a l l, on S C, Ma l ay si an A n ti- Cor r u p ti on Commi ssi on ,
con v i cti on , b e l i ab le to a fi ne n ot th e Roya l Cu stom s of Ma l ay si a, Min i str y of
e xcee d in g RM50 mi l li on or to D ome sti c Tr ad e, C o- ope ra t iv e s a nd
i mp r i sonm en t for a te r m n ot e xcee di n g Con su m e r i sm a n d Cy b e r S e cu r i ty Ma l a y si a .
te n y e a r s or to b oth .
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 BNM DUE DILIGENCE

The purpose of this Due Diligence is to outline the industry standard practice to be adopted by a
licensed onshore bank (LOB), and by extension its Appointed Overseas Office (AOO), when dealing
with their clients in relation to the FE rules, either directly with the LOB or via the AOO.

This BNMDD guide shall be read together with FE Notices issued by Bank Negara Malaysia (BNM) on
15 April 2021 which comprises of the following: (a) Preamble & Interpretation; (b) Notice 1:
Dealings in Currency, Gold and Other Precious Metals; (c) Notice 2: Borrowing and Guarantee; (d)
Notice 3: Investment in Foreign Currency Asset; (e) Notice 4: Payment and Receipt; (f) Notice 5:
Securities and Financial Instruments; (g) Notice 6: Import and Export of Currency; and (h) Notice
7: Export of Goods.

h t t ps :/ /w w w. bn m . go v. m y/ do c um en t s / 20 12 4/ 60 36 0 / Min im u m+ D u e+ D iligen c e+ Con s

olida t ed. pdf

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 CONCLUSION

Fo r ex trad in g is le ga l in Ma lay s i a, pro v id in g t he us e o f a ppro v ed and r eg ul a ted

ins tit ut io ns an d age nc ies by the M alay s ia n go v ernm ent . Ho w ev er, as a tr a der,
y o ur jo b is to alw ay s be d il ige nt . Cho o s e a re li ab le Fo rex bro ker an d eq uip
y o ur s elf w it h th e rig ht edu c atio na l to o l befo re y o u s tart inv es ti ng i n Fo rex
tr ading .

A dditio n al ly, gro w i ng m o ney an d ac hiev in g fi na nc ia l freedo m thro u gh Fo rex

tr adi ng is am a zi ng. Ho w ev er, bew are o f the Fo rex tradi ng s c am s that ar e
happening and ens ure y o urs elf to no t fall fo r any o f their tricks .

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 USEFUL LINKS

h ttp s: //w w w. th e e dg ema r k ets. com /a r ti cl e /bn m - a pp r oves- r e fi n iti vs- fxa l l -e l ect r on i c-
tr a d i n g - p l at for m

h ttp s: //w w w. m a l ay ma il . com /n ew s /m on e y/2 0 20 /0 6/2 4 /b loom be r g - obta i n s- bn ms-

a p p r ov a l - for - fxgo- i n -ma l a ysi a /1 87 8 45 2

h ttp s: //w w w. for e xb r ok er s. com /g u id es /m a l a ysi a

h ttp : //fr a u d a l e r t.b n m.g ov. my/0 2 0 3_ for e x.h tm

h ttp s: //w w w. m a l ay ma il . com /n ew s /m a l ay si a /20 1 7/0 6/2 2 /w h at - w as- th e -b nm -for e x-

sca n d a l /1 4 0 5 2 0 1

h ttp s: //w w w. b n m. gov.my /d ocu men ts /2 0 1 2 4///cc3 6 0 5 60 - 5c0 3 - ba 6 f- 63 eb - 96 0 5e 4c1 2 2 50

h ttp s: //w w w. i n ve stop ed ia . com /a r ti cl es /a cti v e -tr a di n g /0 2 2 71 5 /20 - r ul es- fol l ow ed -

p r ofe ssi on a l - tr a d e r s. asp

h ttp s: //w w w. b n m. gov.my /fi n a n cia l - fr au d -a l er ts# sp ot

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Thank you

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