Author:Vishal Doshi
Date:02-11-2017

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Forex Trading in India is legal or illegal

As per the guidelines of Reserve Bank of India (RBI) and certain terms set by SEBI; trading in foreign exchange is "Legal" only through NSE Currency segment, MCX-SX, with the "only" foreign currency paired with Indian rupees.

Forex Trading Illegal in India :

  • As per the RBI norms, any person, or firm found trading in Overseas Forex Market by any means of the internet; say trading portals or electronic media(in currencies other than mentioned above) will be considered illegal.
  • Hence, a person is liable to penalty under the act of violation of FEMA Act, 1999.
  • Banks in India providing card facilities and online banking services to their resident Indian customer must clear these norms.
  • Any exchange of receipt or payment or remittance of currencies in overseas trading by any internet portals or electronic media will be considered Illegal.
  • Penalty to respective resident or residents, according to the RBI guidelines by the representative of RBI for violation.
  • FEMA Act, 1999 regulations
  • KYC (Know Your Customer) standards
  • Anti-Money Laundering (AML) norms.
  • NRI are not bound to these norms.

Why is Forex Trading illegal in India ?

  • There are people who are fraudulent, cheaters who carry unauthorized business and fake run agencies.
  • These fraudulent hunts for specific investors who are ready to invest their money and guarantee them heavy investment returns.
  • They get easily trapped because of the greed of earning high profits in short run.
  • RBI warns Indian residents to not fall into the trap of such unregistered agencies.
  • Transactions by such fake agencies are unauthorized and hence to be considered "Illegal."
  • No guaranteed high returns are possible without years of proper market research and good time investment.
  • Instead will have to suffer a heavy loss of finance, if fallen in prey.

What is the effect of Forex Trading in India on INR ?

  • Reserve Bank of India does not allow Forex trading in India because RBI already has lesser denominators of dollars as compared to other countries. On losing against traders out of India, you depend on RBI for the money to pass it on. Borrowing currency from foreign countries creates a deficiency in monetary reserve of our nation. RBI will suffer huge losses if everyone in India gets trapped in the scandalous behavior of the Forex market.
  • The Indian government will have to buy currency from outside, in the form of debt to reimburse the money lost in Forex trade. It causes deflation in the value of INR.

4 Legalized currencies pairing in India are :-

  1. USD/INR
  2. GBP/INR
  3. EUR/INR
  4. JPY/INR

Whenever India buys anything like precious metals, gems, crude oil, electrical machinery, plastic articles, etc. from different countries of the world such as USA, Canada, China, Japan, Indonesia, etc. We have to buy US Dollars by selling INR, causing a devaluation of our INR. INR loses its purchasing power and US Dollars gains more purchasing power. If Indians trade in Forex market with citizens outside from India, then our currency will weaken up. To, not let it happen, RBI restricts only up to some currency pairing which will not let INR flow out of India. Only Indian citizens can trade internally under specific currency pairs.

How can you trade Forex legally in India ?

  • You can trade Forex legally in India by residents in the form of currency derivatives with the help of some currency brokers registered under currency derivative segments.
  • NSE (National Stock Exchange), BSE (Bombay Stock Exchange) and MSEI (Metropolitan Stock Exchange) give a chance to trade in currency derivatives and are very easy to find on SEBI’s (Securities and Exchange Board of India) website.

Forex Trading in different countries of the world :

The term "Forex" stands for "Foreign Exchange." Under market of Foreign Exchange, International Banks trade by financial aspects based on Bond Market; may it be debit or credit. According to many economists, Forex traders are the "speculators","idiot traders" that destabilize the market conditions. Forex trading is gambling that involves economic policies in the gamble. Forex trading is the market for currency speculation.

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Need for Forex :

  • Foreign exchanges start with the need of barter system in exchange of valuables among ancient Egypt and Greek.
  • Forex Market was more encouraged in the medieval period between Country of Holland and Kingdom of England as a source of exchange of currencies.

Forex Trading - Diffrent Policies in Diffrent nation :

  • South African Forex works in adjustable exchange rate system.
  • Nigeria has a free and open market, for its citizens interested Forex brokerage industry, to choose from diversified online brokers.
  • Numerous Forex brokers are available in Germany who are 100% secured by the legal authorities. There are no security issues; one should worry about while trading in Forex with German brokers.
  • Malaysia has not yet included Forex trading in its rule book of the regulatory framework. Hence, no specific agency has come up with the regulation of Forex brokers.
  • "Netherlands Authority regulates the Dutch Financial Market for the Financial Markets (AFM)."

Forex Trade Beginning in Various Countries of the world :

  • Only exchange of "Coinage" was seen among ancient Egypt and Greek.
  • During 17th-18th century, Amsterdam[1] participated in the Forex Market.
  • 1850 was the period in the USA for Forex.
  • Beginning of 20th century was considered to be the era of Forex wherein world nations like London, Paris, New York City and Berlin actively participated.
  • In 1954, "Bank of Tokyo" became a Forex Market Center in Japan and allowed dealing in many more western currencies.
  • There was a closure of Forex Market because of differences pertaining between "Bretton Woods Accord Agreement" and "European Joint Float Policy"; in 1972 and 1973.
  • "People’s Bank of China." in China, allowed trading from 1st January ’1981.
  • Iran getting influenced by the Forex method exchanged "Oil Barter System" with trading into Forex by 1991.

Dealers :

  • Financial Institutions
  • Insurance Companies
  • Corporations
  • Investment Managers
  • Hedge Funds formed as private limited partnership
  • Individual Investors

Forex Trading Hours Country-wise (GMT : 12 hours format) :

European Countries :

London(United Kingdom) : 08:00 am to 05:00 pm
Frankfurt (Germany) : 07:00 am to 03:00 pm
Paris (France) : 09:00 am to 05:30 pm
Zurich (Switzerland) : 09:00am to 05:30 pm

American Countries :

New York City (United States) : 01:00 pm to 10:00 pm
Chicago (United States) : 08:00 am to 04:00 pm
Toronto (Canada) : 08:00 am to 05:00 pm

Asian Countries :

India : 09:00 am to 05:00 pm
Wellington (New Zealand) : 08:00 am to 05:00 pm
Hong Kong (China) : 09:00 am to 05:00 pm
Shanghai (China) : 09:00 am to 05:00 pm
Singapore : 09:00 am to 05:00 pm
Moscow (Russia) : 9:30 am to 07:00 pm
Sydney (Australia) : 10:00 pm (comes online)
Tokyo (Japan) : 00:00 am to 09:00 am
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Legality of Forex Trading in Malaysia :

  • Earlier Forex trading in Malaysia was completely banned. It was illegal to do trading in Forex in Malaysia. Imprisonment and heavy fines are charges, for anyone in Malaysia are caught trading in Forex business. However, over the passing years, Malaysia is slowly opening up to Forex business. There are still many complexes for legal, regulatory authority for Forex brokers in Malaysia.
  • The central bank of Malaysia- The Bank Negara, administers the currency of Malaysia- Ringgit. The Security Commission of Malaysia manages and controls financial companies.
  • Retail traders of different fields in Malaysia have shown interest on a large scale in Forex business. In 1980’s the Bank Negara was active in the market and as a thereof, it holds a fair share of the Forex trading market. But, in 1994 because of overly hypothesizing and bailout, the Central Bank faced failures. As a result, the legality of Forex trading in Malaysia was in danger.
  • Now brokers in Malaysia are now investing more and more funds. They are dealing in trades helping them earn huge profits.

Can a tourist open Forex Account in Indonesia, if yes, how ?

According to the Chairman of Board of Commissioners of the Financial Services Authority (FSA) Muliaman D Hadad in Denpasar, following are the requirements to open a Forex Account in Indonesia:
Provision for the first type of account :
  • A tourist needs to have his or her first account with minimum balance of $2000 to maximum $50000.
  • You Identity verification requires your passport.
  • Accounts with an amount below $10000 are liable for higher charges.
Provision for the second type of account :
  • For no limit account, minimum balance requirement is $50000.
  • Required documents include passport, the bank reference from the foreign national origin, credit card, the identity of spouse or domicile certificate.
Provision for the third type of account :
  • For an account with large amounts.
  • Balance should be more than $ one million with a lower deposit interest tax registered progressively.
  • Documents required are same as in the second type of account.
The main reason for these changes in policy regarding foreign currency account opening is to encourage the tourists, especially frequent foreign visitors to open currency accounts and improve the supply of currency in Indonesian Banking System.

Who provides the Forex trading platform with "Binary Options" in Netherlands ?

  • In Netherland, "binary option" is a new source for investment in Forex Market.
  • Hence, regulations are not well developed at this stage and are still in the process.
  • Even the well-known Brokers thereby are not well administered currently.
  • Though regulatory norms are unfulfilled, there are many brokers who have already applied for obtaining regulations.
  • Their approval is under the process yet.
  • There are many brokers who come under the category of, "Regulated" (partially), for binary trading.

Who are the Dutch Binary Brokers in Netherlands Forex Market, at the moment ?

  1. NRG Binary
  2. EZ Trader
  3. OptiMarkets
  4. Optieclub BV
  5. Planet Option
  6. The Dutch Gambling Commission conducts companies applying to be a Dutch Binary options broker.
  7. MiFID Licence[4] allows these brokers to run their business in Holland.

Benefits to becoming an IB (Introducing Broker) in Lagos, Nigeria :

  • Day by day more and more investors are taking part in Forex market. Therefore trading volumes and profits have boosted.
  • You can get clients from all over the world with the help of a good trading platform and proper internet connection.
  • The Central Bank is the highest authority over finances in Nigeria. According to one of its manual published in November 2006, everyone is allowed to take part in Foreign exchange market by passing through authorized dealers of registered brokerage firms or banks.
  • Currency trading is non-regulatory in Nigeria.
  • Forex market which is a hub for leverage trading, have very fewer regulations and restrictions in Nigeria.

Evolution in Forex trading in South Africa :

  • In current time zone, South Africa is developing a lot. As of now, millions of South African citizens are rich and are in search of proper sources of investment in the market to earn maximum profits.
  • South Africa has not yet taken over other nations regarding economic growth, comparatively. But, the nation has proved itself to be a developing nation in its real meaning. Since, 2012 South Africa has shown the world a graph of consistent progress economically, compared to past 20 years.
  • South Africa is still new to Forex market. Many South African investors are participating in Forex trading Market, because of the fact, that they can earn money (profits) based on the power of Base currency v/s Currency of the trader from another country.
  • The value of RAND[5] (South African currency) depends on demand and supply forces existing in the market, like every other commodity. This demand and supply theories are directly related to the country’s economic growth.
  • In 2013, RAND helped 18th position in most traded currency all over the world. South Africa reports only 0.3% of daily foreign exchange turnover. And, the RAND records 1.1% of daily currency trading in the world.
  • The exchange rate for a country will build stronger when domestic interest rate increases and attracts more foreign capital. Lesser inflation will attract foreign investors for earning a higher rate of interest on their money.
  • The weakening of Rand value will lead to a decision to lower rate of interest by the South African Reserve Bank[6], causing high inflation. Hence, imported goods will become expensive. Further devaluation of RAND occurs.
  • South African government controls the limit of finance that you want to in Forex. But, this will not hinder your progress as Forex market does not demand huge capital investment to earn high profits. It’s all about the correct deal at the right time in the right currency pair. While dealing in South African Forex Trading market, you will have to be extra cautious with currency understanding.
  • Trading in South African Forex Trading Market is a lengthy game.

Is Forex Trading Legal in South Africa or not ?

Forex trading is 100% legal in South Africa. But, citizens, brokers, and investors thereof are unaware of many regulations thereby. South Africa has many different laws. From 2010 moving money around in the Forex trading platform became simple and an easy task, legally, compared to past few years.In short, you just need to be careful while choosing your broker, correct software and be aware of scams and wrong investment schemes.

Can I make money in Forex Trading in Germany ?

  • Forex trading is legal in Germany.
  • Federal Financial Supervisory Authority (BaFin) handles all the financial activities in Germany.
  • BaFin is a trustworthy authority covering Forex brokers along with regulating other financial institutions like banks, insurance companies, corporations, etc.
  • BaFin has a unified regulatory system.
  • BaFin gives licenses to German brokers. It follows activities of traders as well as brokers companies in the market for the control thereby.

Financial Trading status of Germany :

In last three years, more than 67% of online trading accounts have increased in Germany. In Germany, 10% share of total financial earnings of the country comes from Forex Trading Market.Commercial companies, Hedge Funds, Authorized banks and investment management companies are all included in financial trading in Germany. Germany holds a position of a heavy national share of more than 19% of financial trading from all over the world.We can say that Germany is a progressive nation regarding economic growth, especially when it comes to Forex trading. From telephone era to computers, laptops, mobile phones, and tablets, German traders are found online on a large scale.

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