Wondering About Forex Regulation in Indonesia? Read our Guide to BAPPEBTI Forex Brokers
In Indonesia, regulation of Forex brokers falls in the lap of BAPPEBTI. The initials stand for Badan Pengawas Perdagangan Berjangka Komoditi which roughly translates to the Commodities and Futures Trading Regulatory Agency. The agency was launched in 2005 and is the only agency in Indonesia responsible for regulating various financial entities, including BAPPEBTI regulated brokers. It is supervised by the Ministry of Finance and managed by a board of administrators made up of industry experts who have been selected by the Indonesian government.
Forex brokers in Indonesia and retail traders
Forex trading in Indonesia is becoming increasingly popular in the country. It is a heavily populated country with a largely Islamic population. The number of Forex brokers in Indonesia is unsurpriingly also increasing in order to keep up with demand. A wide variety of tradeable instruments are now being made available by local and international firms. Traditionally, BAPPEBTI regulated brokers have tended to only offer futures and commodity trading, with only a small number offering Forex trading. This resulted in an increasing number of international Forex brokers targeting the Indonesian market and gaining quite a foothold in the country. This, of course, led to an ever increasing number of brokers offering their services to Indonesian investors and an inevitable number of them turned out to be scams. A large number of Indonesian investors lost huge sums of money. In 2013, things changed for traders in Indonesia, when the Government started to take regulation more seriously and a number of Forex brokers were banned as well as the associated platforms.
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The regulatory system in Indonesia is still going through a period change
There were a number of international Forex brokers that decided to take advantage of the growing market of young potential Forex traders. It wasn’t the easiest of markets to break into as the business infrastructure is not as economically viable or open as many other emerging countries. There is also high taxation in the country and piles of red tape for anyone wishing to set up a business. A much easier way for these international Forex brokers to offer services was through an online platform. This angle of attack was helped by the lack of a regulatory framework or even a basic set of guidelines. A significant change occurred in 2013 when the Government decided to initiate an overhaul of the industry and began looking much more closely at the rising number of Forex scams, aiming to end them completely. It decided on this course of action following the loss of millions of dollars by Indonesian citizens. The general public was given all the details of existing brokers scams and complaints which had been raised against broker companies. It did this by creating the TRUST+ website to inform Indonesian citizens of the risks and fraudulent practices happening in the world of Forex trading. What happened next was BAPPEBTI forex brokers offering tailor-made services for Indonesian citizens. But while these home-grown licensed brokers were able to achieve licensed status the level of service and sophistication was unable to match that from major international brokers. This upset a number of industry experts and the public in general and because of the lack of high-quality choices from local brokers, the Government decided overseas brokers could operate in Indonesia. A requirement was for the brokerage firm to follow the relevant terms and conditions of local authorities. It also appears the ban on international Forex brokers has been removed and citizens are now free to choose whatever broker they want. With the advice being, of course, to only pick a regulated Forex broker.
How BAPPEBTI forex brokers are able to operate
The trading conditions imposed by BAPPEBTI are in compliance with Sharia law. The fact that Indonesia is a largely Muslim country means Forex brokers in Indonesia have to offer specially designed Sharia-compliant accounts, because while Forex trading isn’t considered wrong on religious grounds, a number of special trading conditions have to be followed. There is, unfortunately, no assistance provided to traders who fall victim of financial scams because the regulatory framework is still very much in its early days. Which, of course, still offers a glimmer of hope. Because Indonesia, like many other emerging Forex trading markets, is taking the whole issue of Forex trading and associated industries very seriously. It isn’t going to be long before the Government authority increases the regulatory scope of BAPPEBTI and add the licensing and regulating of Forex brokers to its list of responsibilities. It has already shown it is more than capable of regulating and licensing financial operators dealing in commodities and futures.
Why some international Forex brokers are still reticent about setting up in Indonesia
It is still not a very popular idea for many of the mainstream Forex brokers to set up operations in Indonesia. There are a number of reasons for brokers choosing to stay away from the country. There are still no solid guidelines in place for financial companies to follow which means businesses aren’t able to benefit from a stable business environment. Many consider the business costs in Indonesia to be very high and it would be difficult for any new business to recover invested capital through a retail trading business. Business tax is also very high in Indonesia, which is bound to put companies off the idea. Nevertheless, there are a small number of brokers which have been able to gain a favorable position. But this doesn’t prevent a number of unregulated brokers also setting up offices in Indonesia, and any citizens would be advised against making this choice. Traders can only benefit from choosing regulated brokers as it guarantees the safety of trading funds. It also offers the best possible environment in which to become a successful trader. As we’ve already mentioned, regulated Forex trading is still in its infancy in Indonesia. And we’ll do everything we can to keep you updated on the latest situation.