Forex trading has become a very popular activity in the world. Profits and dividends that people receive from trading caused a massive surge in the number of traders. It gained a foothold in numerous countries and reached the United Arab Emirates as well, resulting in UAE Forex brokers to gradually increase their presence within the state.
The United Arab Emirates, especially Dubai, is one of the fastest-growing financial centres in the world. This is partly due to the high income of the population and the abundance of private investors who are in search of profitable investments. Favourable conditions in the Middle East attract many brokers; nevertheless, there are still a large number of unregulated brokers with offshore licenses that provide their services. However, this fact does not mean a shortage of regulated forex brokers.
The history of the Forex industry in the UAE is very interesting. Actually, the state was the first that established support for the financial sector in the whole region. It provides local as well as international investors with the comprehensive regulation system.
The continuous effort from the UAE to build a financial system with a business-friendly environment has been a driver for attracting more people to the Forex industry and expanding UAE Forex brokers list. Even though the majority in the country practice Islam and religious law plays an important role, the country chose a more Western model of business.
The official regulator in the country is the Central Bank of the United Arab Emirates, which controls a lot of things in the country. Considering the factors mentioned above, it is important to review Forex brokers in the country and provide useful information before starting trading in the UAE.
Trusted Forex brokers in the UAE
When it comes to trading in the Forex industry dealing with a reliable and honest broker is a must. Given the specific characteristics of the Middle East and the Islamic world in general, it is always a difficult job to find a good broker. Even though the UAE Forex market may seem unregulated at first sight, the industry is very well-regulated, and Forex brokers in UAE are well renown for the quality of their services.
When you are looking for a broker in the country, you should always pay attention to the license. Therefore when you want to find legit Forex companies in the UAE always choose the ones which are regulated by the CBUAE and licensed by the Securities and Commodities Authority (SCA).
Reviewing brokers and thoroughly examining the license is very important because the prevalence of sophisticated scams annoy a lot of people.
Regulation of Forex brokers in the United Arab Emirates
Before starting to trade, one should closely examine the regulatory board of a particular country – how authoritative it is and what are its requirements. Laws and regulations protect customers for complications, and in case anything happens, a person should have a legal basis to ask someone for assistance. With unregulated brokers, everything is more complicated.
As has already been mentioned above the primary regulatory entity in the UAE is the Central Bank of the United Arab Emirates.
A brief history
Until 1959, the monetary unit of the principalities was the Indian rupee, the issue of which was made by the Reserve Bank of India. In 1959, the Reserve Bank of India issued a special monetary unit for the principalities – the Persian Gulf rupee, which replaced the Indian rupee. We are talking about times when Forex brokers in the UAE have not emerged yet.
Gulf Rupee was equated to Indian Rupee. After the devaluation of the Indian rupee in June 1966 and the subsequent devaluation of the Persian Gulf rupee by 36.5% of the principality, they abandoned this currency.
The Central Bank of the United Arab Emirates was originally created under the name of the UAE Monetary Council on May 19, 1973, in order to resolve the issue of creating a national currency. Prior to this, the Bahraini dinar and the Qatari rial were in circulation for a long time.
Following Article 5 of Law No. 10, the UAE Central Bank directs the monetary, credit and banking policies and monitors their implementation in accordance with the general policy of the state in such a way as to support the development of the national economy and the stability of the currency. To achieve its goals, Law No. 10 gives the Central Bank of the UAE, the following powers on Forex brokers in the UAE and assigns the following responsibilities:
- Issue of national currency;
- Maintaining the stability of the currency within the country and abroad, ensuring its free convertibility into foreign currencies;
- Pursuing credit policy in such a way as to promote the balanced growth of the national economy;
- Organization and promotion of banking activities and monitoring the effectiveness of the UAE banking system;
- Performance of the functions of a bank of a government of a country within limits established by law;
- Advising the government on financial and monetary issues;
- Maintaining the country’s gold reserves and foreign currency reserves;
- Functioning as the central bank of the country;
- Representation of the financial interests of the state in the International Monetary Fund, the International Bank for Reconstruction and Development and other international and Arab funds and institutions, and carry out state operations with these organizations.
The CBUAE’s Consumer Protection Department works hard to protect consumers from financial complications through education, policy-making, and compliance observing and tracking the problems in the market regarding CBUAE regulated brokers.
The Central Bank of the United Arab Emirates, which is a state institution, in addition to its responsibility for monetary policy and banking, is responsible for controlling brokerage in the Forex market. The Central Bank is also authorized to grant licenses to brokerage companies trading in the foreign exchange market or intermediary organizations.
Obtaining a license is a rather complicated process since many provisions require compliance with the proper level of quality of services and guarantee honest and transparent business conduct by the broker.
The UAE Central Bank works in accordance with the SCA regulator to ensure that all conditions necessary for obtaining a license are fully met. The most important condition for obtaining a forex license is UAE citizenship. Secondly, the state’s share of the total capital of the company should be at least 60%. Finally, the minimum authorized capital ranges from one to three million dirhams, depending on the nature of the company. These requirements ensure that the CBUAE approved Forex brokers provide reliable services to their clients.
The SCA financial regulator also plays an important role in the licensing and control process and is responsible for ensuring that forex brokers comply with legal and regulatory standards. SCA seeks to protect traders and generally improve financial markets through transparency and fair legislation.
Thus, each broker intending to provide financial services in the Forex market is regulated by the central bank of the UAE and licensed by SCA.
The Dubai Financial Services Authority
We mentioned about the CBUAE but, the DFSA is a special regulator for Dubai particularly. The Dubai Financial Services Authority was formed on September 13, 2004. The main goal of creating a regulatory body was to register new enterprises planning to operate in the territory of this emirate. By and large, DFSA is involved in regulating the operation of the international financial center in Dubai.
The initial concept of the regulator’s work implies that the state structure should control the activities of organizations that are involved in asset management, banking and credit institutions, as well as top UAE Forex trading brokers, the securities turnover sector, collective investment funds, depository, and trust companies. In addition, the regulator is in charge of commodity futures trading, Islamic finance, insurance, international stock exchanges and derivatives trading.
Today, the financial regulator controls insurance and brokerage companies. This means that the department monitors the work of market makers, brokers, dealers, large traders and investors, ETF funds, as well as all issuers of shares, bonds, bills, derivatives and other financial instruments. The regulator controls the companies that have passed the listing of the issue of their own securities on the Dubai Stock Exchange (Dubai Financial Market). As of the beginning of April 2019, the capitalization of this trading platform was $95.65 billion.
In May 2017, the Dubai Financial Services Authority expanded its operations. The regulator also began to work in the financial and technological sector. Since that time, the management has been issuing licenses for the right to conduct business to start-ups, which offer interested parties participation in innovative projects and promising ideas.
DFSA Responsibility Area
In addition to regulating financial services and supervising the UAE Forex brokers regulation, the Dubai regulator is responsible for complying with legal requirements related to combating money laundering and terrorist financing. The department also conducts audits of partners of reporting companies in order to confirm compliance of their activities with current norms and rules.
The main objectives of the financial regulator are the following areas of activity:
- Authorization and registration of new companies that wish to operate in the United Arab Emirates;
- Issuing organizations with the status of a recognized member or recognized body, allowing companies to provide certain types of services in the relevant market segment;
- Conducting an audit of the activities of reporting companies and identifying violations in their work;
- Handling complaints of violations by businesses on the DFSA registry.
- Forex brokers licensed by Dubai FSA
- Before starting work in the regional market, financial institutions should obtain the relevant documents. First of all, the licensee should create a company in Dubai, the main activities of which will be called the provision of services related to Forex.
If you want to trade with UAE Forex brokers, you should definitely choose the ones with licenses. For a Forex company in the UAE to obtain a license, one must submit an application along with a package of documents, including the charter and memorandum of the organization.
It is noteworthy that extremely strict guidelines in its activities guide DFSA. Obtaining a license in Dubai and then doing business in the region is a rather complicated task. The regulator seeks to avoid mistakes and complications; therefore, all applicants should properly follow the recommendations of the management. Right now, the company only has 8 companies licensed.
In 2009, Dubai barely managed to avoid default. After stabilization of financial stability in the region, the regulator set about restoring business reputation. In November 2013, it became known that the DFSA decided to take tough measures aimed at combating financial irregularities and strengthening international status.
How to find UAE registered brokers?
Finding the CBUAE regulated Forex brokers could be tough sometimes, as we are faced with fraudulent schemes. But in the case of the UAE registered brokers things are different. The process of finding licenses is an easy task, yet it still requires close attention and thorough examination.
The first thing that you can do is to visit the official website of the Central Bank of the United Arab Emirates and check the registered companies on the main website. The information will be relevant and it updates all the time – from time to time more brokers are added to the list, but as has already been mentioned above, obtaining a license requires the provision of valid documents.
If you encounter a UAE based Forex broker on the Internet and visit their website the registration documents should be available at the very bottom of the website. If it is not written or is obscure and you cannot fully understand what it means than most likely you are dealing with a dishonest broker and it does not belong to the list of UAE regulated Forex brokers.
The third thing you can do is contact directly to the CBUAE or DFSA depending on the establishment of a broker. There are cases where on the broker’s website it is written that the license is provided, but it might be outdated and not valid anymore, so by contacting the official regulator you will get the relevant information.
To find out if the main regulatory body indeed regulates the broker, you can also check with the broker and look for any different brand names or subsidiaries that are registered with the regulator. In general, you might never need this tip because if you directly contact a regulatory entity, you will get a proper answer, but it is always better to know more when it comes to finances and risks associated with it.
Contacting directly with a broker is another option, but there are also threats that it might deceive you into gaining your attention. New UAE Forex brokers emerge every time, and they use all fraudulent mechanisms to trick people.
How do the CBUAE and DFSA prevent FX scams in the UAE?
CBUAE does a great job in helping the state avoid unregulated brokers. Every broker that is registered within the CBUAE should provide independent audit reports through professionals and submit them to the banks so that the latter could be sure in the clear financial history of a brokerage company.
Furthermore, the bank always warns clients to stay away from suspicious brokers that do not have regulations. They should always look for the ones which are regulated by the CBUAE. The latter tries to flag suspicious brokers and declare them as scams.
The DFSA in its part also strongly opposed scams, that exist in the country. If not following the conditions and terms of services, the entity is entitled to impose penalties and fines on a brokerage firm and even suspend the license.
In addition to Forex trading brokers for Arabians, in 2013, the regulator imposed fines on a number of banks operating in the special economic zone of Dubai. The list of violators included BNP Paribas SA specialist for working with wealthy clients. An employee of the bank, without the consent of the client, carried out operations worth about $8.4 million. Also, the fine was paid by the head of the local branch of the Lebanese bank, which overestimated the net assets of the client by about 26 times.
The UAE government also provides potential investors with the opportunity to open their own business while retaining full ownership. Both ADGM in Abu Dhabi and DIFC in Dubai are free economic zones for financial companies, including a number of best Forex broker in UAE, that are considering obtaining a Dubai Forex license.
Abu Dhabi Global Market (ADGM)
The Abu Dhabi global market is located in the UAE capital and includes three independent bodies: a registration authority (RA), a financial services regulator (FSRA), and courtrooms in the Abu Dhabi global market. FSRA is the regulatory authority for financial companies operating in the ADGM Free Zone.
Dubai International Financial Center (DIFC)
DIFC is a nominee sector in Dubai operating within the framework of an independent regulatory system as a free financial zone. The Dubai International Financial Center seeks to provide fertile and safe soil for the development of financial enterprises and institutions outside the region. Dubai Financial Services Authority (DFSA) oversees forex brokers with a DFSA forex license. DFSA’s tight regulation enforces regulatory compliance by affiliated companies related to UAE Forex trading.
To summarize, the United Arab Emirates offers forex brokers a wide range of opportunities, such as zero tax for legal entities, the absence of double taxation, world-class infrastructure and an open business environment. Do not forget to always look for CBUAE listed Forex brokers.