Forex Trading industry is getting more and more popular over the years. The industry was first very popular in western countries but now has switched to every region of the world, and millions of people are involved in forex trading. The tendency does not seem to slow down and thus more and more people are expected to trade forex in the nearest future.
As mentioned before, the industry did not have that much popularity in the Eastern countries but rather got it very recently. Many people from Asian and Eastern countries try to learn about forex as much as they can. Many pieces of training and educational courses are available for the ones who are interested. On of the leading countries in terms of ever-rising interest in the industry, is Sri Lank. Forex is relatively new to the country and population, though is already very popular and many people are involved in trading very actively.
Considering tp many other countries Sri Lanka does not have a very rigid economy but is working hard on the improved and development of the economic situation of the country. As far as the Forex industry is getting more and more popular and it needs a stable economy in order for people to take an active part in it. The governmental officials are working in improving the sector and thus have recently imposed certain guidelines for the forex trading industry in Sri Lanka.
Forex Trading Industry in Sri Lanka
Comparing to the size of the country, which is 22.4 million people, there are relatively more financial companies operating in the country. The economy has been developing for the past couple of years and the results are actually way better than some of its neighboring countries, yet there is still a big room for development. The factor which contributes the most to the fast development of the industry is the population, which is very innovative and has an extremely entrepreneurial spirit.
While there are many forex trading brokers in Sri Lanka, there also are a lot of people who are willing to make their living out of trading. The legal situation within the industry in Sri Lanka is way better than it is in some other countries, which have just started popularisation of the forex trading. The Central Bank of Sri Lanka is the main regulatory authority of the forex industry and has taken control of all major operations in the market. Due to this fact, the regulator does not allow the industry to spin out, just like many other countries did. Despite the regulations and the changes the country has introduced, there are still some brokers who are operating illegally, without the license. While there is the legal framework, which cares about customer safety, there are still some major points to take into consideration if you are willing t start forex trading in Sri Lanka.
However, it is extremely hard to find the best Forex broker if you do not have enough knowledge about the market. It is especially hard for those who have just started trading Forex, and to help you out, we have decided to come up with a list of the best FX brokers. Take a look at the list below!
Forex Trading Regulations in Sri Lanka
Before knowing some major steps of choosing the right broker and knowing some of the major characteristics the forex brokers Sri Lanka must process, you have to know some of the details regarding the regulatory framework of the forex industry in the country. As mentioned before the forex broker industry is majorly regulated in Sri Lanka by the Central Bank of Sri Lanka. All brokers operating in the country have to register with the Central Bank. Though, the registration process is not only about filling the blank and receiving the license but is rather complex. In order to register, the broke needs to satisfy some of the major requirements imposed by the regulator.
While the Central Bank of Sri Lanka is the main regulator, the Exchange Control Department is specifically in charge of the forex market and trading in the country. This is the department, which you have to address in case of any concerns in the process of choosing the right and legit broker to trade with.
It is not the first-ever regulations, and it is not the first time Sri Lanka tries to regulate the market. The registration and the legal framework making process has taken a round of changes. Exchange Control Department was first established back in 1935 by the Exchange Control Act No24. It should be no surprise that the laws included in the act were not modernized and were quite old. They did not consider some of the technological advancements and thus did not mention it, in law. As a result, some major changes regarding some of the technological advancements and changes were introduced in 2017. The following framework was named as the Foreign Exchange Act No.12, which was implemented by the new Department of Foreign Exchange. The changes made back in 2017, had some of the major impact and effects on the local forex industry.
Foreign Exchange Act No. 12
The main intention of creating a new act was to liberate the forex industry in the country. Prior to that the laws and regulations were restricting the operation of brokers. According to the Foreign Exchange Act, the laws and the framework became more liberal, which was, of course, great news for the Sri Lanka forex brokers. Not only the idea of the act changed, but there were some of the major changes made in the terminology of the act as well, which became way more technology-oriented as well as modernized. The new act refers to Exchange Management instead of Exchange Control, which shows the openness and the positive attitude of the government to foster Forex activities but also to do so responsibly.
Some of the excerpts mentioned below should give you a clearer idea about the act itself and the idea behind it.
“Prior to dealing in foreign currency for a current transaction … an authorized dealer or a restricted dealer shall request the person requiring foreign exchange for such transaction to provide such information or produce such documents or make such declaration as is reasonably necessary, in order to satisfy himself that the requirement is in relation to a current transaction and is in conformity with any other laws regulating such transactions.” This law touches upon the KYC regulations but is loose enough not to restrict Forex traders in Sri Lanka from being able to use the services provided by the ‘authorized dealers.
“Where the Central Bank is satisfied that an authorized dealer or restricted dealer:
(a) deals in foreign exchange in any current transaction or capital transaction contrary to the provisions of this Act;
(b) deals in foreign exchange in relation to foreign assets contrary to the provisions of this Act;
(d) violates any provision of this Act or any regulation or order made thereunder, the Central Bank may, upon the Minister being informed, issue a notice directing any such authorized dealer or restricted dealer to comply with the provisions of this Act or any regulation, Order, guideline or direction issued or made thereunder, within the period specified therein.” In case the dealer doesn’t comply, the central bank is able to suspend its authorization. For users, this means that even if you are using a licensed, completely legal Forex brokers in Sri Lanka, if they can’t be trusted to follow the regulations completely, there’s still a risk of them being suspended.
While this act concerns all brokers operating in Sri Lanka, not all Sri Lanak trading forex brokers are regulated and licensed. Some of them find a way to operate outside the legal framework to operate in the market illegally. It is very important that you learn to prioritize the licensed brokers for your choice. This is for your own safety and thus, make sure to check whether the broker operating in the market has a proper license.
To understand the process, take into consideration several points. The operating company has to apply for the Certificate of Authorization to the Director of Domestic Operations at Central Bank of Sri Lanka. The companies which have already been operating in the market, have the full right to do that as well. The application has to go through a screening process first, which will assess if the broker is qualified for the operation and offers legit services to the costumers and citizens of Sri Lanka. Those requirements are not very tough and are not hard to comply with. They are pretty similar to some other countries. Some fo the conditions to meet the requirements by a facilitator include the qualified and experienced staff, the CEO without any criminal record, and the compliance to the Central Bank of Sri Lanka regulations and some more, very common requirements.
While we have mentioned several factors that contribute to the formation of a licensed and authorized forex broker, it still does not mean that the broker with a license is the best choice for you.
Best Sri Lanka Forex Brokers
As the forex trading industry is a relatively new industry in Sri Lanka, there are a lot of people who are very new to the industry and need to learn and get acquainted with the industry before they start trading on their own. Choosing the right broker is usually a big issue not only for Sri Lanka newbies but for people all over the work. The major thing during the choosing process is to be attentive and to have the patience in comparing different brokers with each other. This way you are less likely to miss any better opportunities.
The first thing to consider while choosing the right broker is the security the broker can provide you with. Besides the license and the registration of the company, also make sure to check the background od the company. The history of the company will most probably uncover all of the secrets and operations of the company over the years. The broker should provide information on how it works and how it is regulated. IF you can not find this information anywhere on the webpage, then you should not work with the broker at all.
The broker might say it has the Certificate of Authorization from the Central Bank of Sri Lanka. In this case, just double-check with the institution that the broker is providing you with the correct information. There might be some Forex brokers in Sri Lanka that will operate for a short period of time to defraud the customers. They might be willing to lie about their regulatory status. Make sure you’re not opening an account on such a website.
Sri Lanka forex brokers could also say that they do not possess any certification and the certification authorization of the country. The best option is the force that the broker has a local license, but in case it does not have one, you do not have to cross it straight away, first of all, check if the broker is regulated in other countries and territories. If it has a license to operate in other countries, it is more trustworthy than if it doesn’t have any license anywhere. The latter are better avoided. Regulations establish some standards that protect you as a customer so if a company is regulated, you can have some sort of a guarantee that it is adhering to those standards.
Security is not only about the license, while it is some kind of guarantee, but the protection of the customer is also another thing to consider. Security measure is mainly considered in order to provide the security and protection of the payments and transactions made with the broker. YOu can also complete the background check of the company with some individual audit companies, which should give you the final conclusion about the security of the platform.
Commissions and Spreads
Another important thing to know and pay attention to while choosing the broker from the list of best Sri Lanka forex brokers is the way they make money. Most of the brokers make commissions through spreads, which is acceptable and secure. The other way of earning money is through commissions, which should be avoided.
The spreads are the values of the currency pairs and the trading of the value of the pairs. If you win the company earns money, if you lose, the company will still earn a slight slide form it. This is due to the value it has put as a ratio of the currency pairs. The most common currency pair to trade with the EUR/USD. Though, some brokers may offer you trading in the local currency. Check this information in their terms and conditions. Otherwise, make sure to know what are you willing to trade with before even choosing the broker.
The second thing is the commission. If the broker is earning through the commission, this does not sound very appealing, as this means that the broker has some sort of hidden fees. The information is very easy to find out. In case there are certain requirements of the extra fees for the deposits or withdrawals, this means that there are commissions, and most probably will be some hidden fees. Most of the good brokers, do not do this and earn through spreads.
While trading online you should make sure that you understand the whole process, otherwise, your trading experience might not be the best of it. In order to learn at least the basics, we recommend you to get acknowledged with the theoretical information, available almost all over the internet. This is very important especially when you just start trading. when you know some basics it is easy to navigate through the platform and through the variety of tools.
There is one more option, which is Demo and No Deposit account. Those are the account types the Forex Broker often offers the costumers. The Demo account means that you are given some sort of virtual fund, which you can spend on virtual trading. The funds do not have to be refunded and the tools are very much the same as the real trading. Moreover, the market is almost up to date, meaning that you can track the changes in the market and its influence on your operations.
The perk of the demo account is that you can learn in the process and do not have to spend your own money. When you are acquainted with the market it is way easier to trade on your own afterward. Whenever you feel like the transition to the real account, you are free to do so. Another account type is the No Deposit Account. Top forex brokers in Sri Lanka must be offering you one or another. The No Deposit Bonus is similar to a demo account, though this time, the broker provides you with a certain amount of money, which you can spend on trading online in real-time. You will be given certain funds and time, during which you should trade. After that, you will be switched to the real account and have to make a real money deposit. Both account types are very beneficial and are very handy for beginners.
Payment Methods and Platforms
As for the payment methods, almost the vast majority of brokers offer different types of payment methods. The most common means of payment are Visa and MasterCard. Depending on the region you should be given some additional options as well. Make sure to check it on the website of the broker. The information is accessible on the website and moreover you can find it in the terms and conditions section.
There are several platforms for forex trading. The most common platforms for trading are the MetaTrader4 and MetaTrader. Most of the brokers use those platforms. Both of them are high quality and time-tested, which guarantees the progressive working process and no technical issues on the way. Other than that there are some costumed and web-based platforms available, depending on the broker itself.
Before choosing the broker check the platform they are operating with. If you are already familiar with the platform, it should not be an issue, though if the platform is unfamiliar, then you better check it out first and go through some of the feedbacks and reviews.
How to Avoid Scams
Despite the existing regulations and the security measures taken in places, still, a lot of people have not once become victims of scams. There are many scam providers, especially in the small markets, and still, some people prefer to trade with those brokers. The scam brokers can just steal some money from your account, or not provide with the services they once promised you.
There is a number of regulations, and the check-up, but besides that, you should be careful on your own and always check the validity and the trustworthiness of the website. None of the markets is immune to the frauds and scams, and Sri Lanka is not an expectation. The inflation regime which started back in 2017, has caused the activity of the scam brokers, who’s wanted to take advantage of the situation. This is the right moment to check the history of the broker and to make sure that the broker you decided to trade with is not one of them. If the broker is operating in the market for a couple of years, it is very unlike that the broker is fraud or is illegally operating in the market.