What Are The Singapore Laws On Forex?
The Monetary Authority of Singapore (MAS) acts as Singapore’s Central Bank, and regulates the entire finance industry, from stocks and options to insurance. MAS was founded in 1971 by parliament to regulate the financial actions of various government departments and agencies. MAS regulates over 600 financial institutions – including Forex brokers.
Singapore’s government, although notably encouraging and welcoming of trade, is also strict in its rules designed to prevent corruption and financial malpractice. In Singapore, MAS exists to make sure that all traders and other participants in the financial market are protected from scams or unfair business practices. Because of this, all brokers must be licensed by the MAS before being permitted to trade in Singapore.
To obtain a license, a broker must pass a series of examinations, such as determining that the broker has enough capital to cover potential losses and prevent bankruptcy. Bankruptcy among brokers has caused clients to lose investments, such as in the Black Thursday event of 2015 when major broker FXCM went bust. The requirement for brokers to obtain a trading license is to prevent more events like this!
Another requirement for each broker is the possession of an account for their clients which is separate from the account of the company itself. This prevents company staff from proliferating clients’ funds, and offers an extra layer of security in the case of hacks or breaches. Brokers must provide MAS with regular audit reports to prove that they have been following these requirements, or face immediate disciplinary measures from the monetary authority.
At time of writing, there are 9 MAS-regulated brokers in Singapore – some local and some international. The licensed brokers within Singapore are CMC Markets Singapore Pte. Ltd, IG Markets Singapore, OANDA Singapore, Phillip Futures Singapore, and Saxo Capital Markets Singapore. The international brokers that are licensed by MAS are KGI World, Maybank Kim Eng Securities Pte. Ltd, OCBC Securities Private Limited, and UTRADE FX.
Traders in Singapore can trade in Forex using any of these brokers. International brokers are usually larger institutions, but local brokers can sometimes provide more specialized services.
However, it is not quite as simple as these 9 brokers being the only ones legally available to Singaporeans! The Monetary Authority of Singapore does not actually prohibit traders from trading Forex via unregulated companies – it is legal to sign up and use any Forex broker around the world, as long as that broker is sufficiently regulated and licensed within the country that they are based in.
For Singaporeans, trading with brokers that are not regulated by MAS can carry some risks – in case of being scammed, MAS will be unable to help as their authority cannot cross borders! Using MAS-regulated brokers tends to provide better trading conditions for brokers and investors.