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Things are looking up for Forex traders in Malaysia. Not too many years ago it was considered illegal to participate in such a form of investment. Thankfully, things have changed and now it is possible for anyone to make Forex trades without the fear of ending up in jail. The Labuan IBFC has been set up by the Malaysian government as a special free trade zone, thought to be one of the biggest in Asia.
What is the Labuan IBFC?
IBFC stands for International Business and Financial Center and the Malaysian government has set one up on the island of Labuan off the Borneo coast. Established in 1990, it is being marketed as an area with a unique position for tapping into investment opportunities in Asia and beyond. Its location is conveniently situated between China and India and is in close proximity to several financial centers, as well as sharing a common time zone with a number of large Asian cities. Labuan is an island owned by the Malaysian government and a number of benefits make it the perfect location for IBFC regulated brokers. It can be very expensive for Forex brokers in Malaysia to set up business on the mainland, but not so on Labuan. There is also a lower tax structure for investors and the fact the IBFC is in such close proximity to other emerging superpowers is also a favorable situation. The island is considered to be a great place for overseas companies to invest, but it has some major competition in the form of Hong Kong and Singapore. There are more than 7,000 firms currently operating from the free trade zone including Forex brokers, other financial institutions and businesses. So it’s no wonder it is currently considered one of the fastest growing free trade zones in the world. Malaysia is a largely Muslim country, so mainland Forex trading options have to be in compliance with Sharia law. Labuan, on the other hand, has a more liberal attitude to such forms of investment, allowing Malaysian Forex brokers to receive a recognized license and offer services to a much wider audience. Forex brokers setting up business in the zone also benefit from various privileges and advantages which only improve trading conditions, especially when there are no worries about the legality of Forex trading.
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Who regulates IBFC Forex brokers?
Businesses operating in the IBFC are regulated by the Labuan Financial Services Authority (LFSA). Therefore, IBFC brokers are licensed and regulated by the LFSA. Standards are in line with recognized global requirements and the same minimal capital requirements and operational compliance apply. The Labuan Financial Services Authority was created in 1996 following the approval of the Labuan Financial Services Authority Act. It is the statutory body responsible for developing and managing the IBFC. Its objectives include:
- Promoting and developing the island of Labuan as an international center for financial services and business
- Developing objectives, policies and priorities in line with national ideals for the systematic development and administration of business and financial services
- Serving as the central regulatory, supervisory and enforcement authority for all international businesses and financial services
The main role of the FSA is licensing and regulating and ensuring all licensed entities operate in compliance with national and international standards which have been adopted in the area. The FSA is also responsible for developing policies to ensure business and financial services are conducted in an orderly fashion.
Are Forex brokers in Malaysia a trustworthy option?
The LFSA has so far proved itself to be a very efficient regulator and has one of the fastest turnaround times for brokers wishing to set up business in the area. It has been said it can take as little as two months for a company to incorporate a brokerage in the IBFC Malaysia. The LFSA also allows regulated brokers to work with some of the big name banks for segregating client funds. All of which helps to improve trader confidence and trust. The LFSA is also very keen to ensure all Forex brokers in Malaysia follow the STP (Straight Through Processing) model of trading, which prevents brokers from acting as the counterparty to a client’s trade. There are very few other countries which place such a stipulation on Forex brokers. In 2008, the Malaysian government began to actively promote the IBFC as an attractive location for offshore investment. Ever since then it has been increasing in recognition. A number of mainstream Forex brokers have decided to set up shop in the Financial Center, in order to target the Asian market. Nevertheless, Malaysian Forex brokers are still running a little behind and still not considered to be as reliable and trustworthy as brokers which are a little better known. The Malaysian Financial Services Authority also has a few negative factors including its inability to achieve the efficiency of some of the other better known regulatory authorities.
Picking the best IBFC regulated Forex brokers
When it comes to picking a Forex broker in Malaysia it is imperative you pick a reliable and safe broker. In fact, this should probably be your priority, above and beyond picking one with bucket loads of enticing offers. There are a number of scam brokers who will promise you the earth, and such unbelievable returns on investment which can only be considered too good to be true. If you’re looking for a Forex broker in Malaysia, make sure you pick one which has gone to the trouble of being IBFC licensed and regulated as this will be a broker which enjoys a good reputation in the industry. Picking a Forex broker with offices all over the world and one which is regulated by a well-known regulatory agency will ensure you have chosen a reliable service provider that has its client’s interests at heart and your trading capital will be safe and secure. Choose a broker which is unregulated and you do so at your peril.