Malaysia central bank states Forex is illegal

Good Job there, hopefully our Gov and BNM will reconsider again about this problem...

by my understanding in economy..

currency price movement is determined by the currency demand itself and other economy factor..

Let says..

if we buy other currency such as USD, its may have the negative impact on the currency that we used to buy USD such as ringgit..

it means if we buy USD using our MYR, the price of MYR are tend to close lower against USD..

but if we have USD and convert it to MYR.. does that mean we help the BNM to close the MYR higher that USD in price..

which is good for the malaysia economy..

we only buy USD with our MYR thru our local bank to fund our fx acc..
but we make USD in profit with our fx acc and once again we make our local bank profit in spread to convert it to MYR..

are we the hero or the traitor to our MYR..

just been wondering ?

is my fact are correct or incorrect.. guide me.. bcoz im new..

fromWong Ching Yieng <[email protected]>
ccRantai ak Naga <[email protected]>,
Raja Rohafiza Raja Hassan <[email protected]>
dateFri, Jan 15, 2010 at 4:27 PM
subjectFw: Need Assistance - Response needed./fza
mailed-bybnm.gov.my
hide details 4:27 PM (1 hour ago)

Dear Mr Gallyot

Re our telephone conversation on your e-mail enquiry below. This is to confirm that overseas brokers such as FXCM and FXDD as quoted in your e-mail are not permitted persons to undertake buying or selling of foreign currency in Malaysia.

Regards
Foreign Exchange Administration Department
Bank Negara Malaysia



----- Forwarded by Wong Ching Yieng/Bp/BNM on 15/01/2010 16:23 -----



"BNM Telelink" <[email protected]>
13/01/2010 10:00

To
<[email protected]>, <[email protected]>
cc
Subject
FW: Need Assistance - Response needed./fza






----Original Message----
From:Jey Gallyot
Sent:01/11/2010 02:13 PM
To:[email protected]
Cc:
Subject:Need Assistance - Response needed.


Greetings.

My name is Jey and I called in to BNM Telelink Contact Centre: 1300-88-5465
and spoke with someone named Ismail. Reason for contacting is that I
need your confirmation in writing regarding Forex Trading in Malaysia.
Right now there are A LOT of confusion among local traders who are trading
forex using foreign brokers like for example, IBFX, FXOPEN, FXDD, etc that
are based in overseas like the USA or Cyprus, etc. These brokers are
all registered, approved in their own countries and regulated by their
countries' authority or regulating body like for example NFA which is
regulating US based brokers like IBFX and FXDD. Now the confusion starts
here. Many traders are thinking that as long as they are trading forex with
these legal brokers they are not breaking any laws in Malaysia as
stipulated by BNM which says its illegal for residents to trade forex over
the internet. They refuse to believe even though the direction is given so
clearly. There are alot of arguments given in that forum, some of which I am quoting below:-

1. The recent BNM press statement were not related to exchange control
issues. It was related to illegal forex investments i.e. there IS such a
thing as "legal" forex investments (refer to ECM9)


2. Broker like FXCM or FXDD or any broker in this catagary offer you "Fx
Premium Security" trading ....That is Pair EUUSD. GBPUSD......
You hold your trading accout wth broker in base currency ( like EUR, USD,
GBP...) .......say broker offer leverage 1:100 .....when you BUY EURUSD,
10K lot , broker charge you 100$ and deduct it from your accout..when you
sell back EURUSD broker give back 100$ and respective profit/loss happen
during this trade.
in this transaction you invested in EURUSD Fx Premium Security, hold this
investment and then sold this investment...You hold your trading accout wth
broker in base currency ( like EUR, USD, GBP...) .......say broker offer
leverage 1:100 .....when you BUY EURUSD, 10K lot , broker charge you 100$
and deduct it from your accout..when you sell back EURUSD broker give back
100$ and respective profit/loss happen during this trade.in this
transaction you invested in EURUSD Fx Premium Security, hold this
investment and then sold this investment...

3. if goverment clearly say "you can not trade any instruments whos
underlying asset is Currency" then it will be illegal to trade
EURUSD.....Goverment make all rules releted to there currency...in case of
Malaysia it is RM......and they will not make any comment on EURUSD since
EURUSD underlying asset currency is EUR and USD and not RM.so loop hole
formed

4. BNM only gives a sh!t about ringgit movement. Just don't trade against
the ringgit!. Convert your ringgit LEGALLY to USD (within scope of existing
rules), and then after that, what you do with your new asset is your own
business.

Above are all the different points raised in the forum. So it can be clearly seen that there is a lot of confusion regarding this issue

I need your reply and response to this query.

Can Malaysians trade forex over the Internet with an Approved broker from
the overseas (for example U.S.A) who are regulated by the NFA and is
totally legal in US under their own account for themselves. Yes or No?

Please note the below also;
1. They are not involved in illegal deposit taking from the public.
2. They are not involved in scams, pyramid schemes, etc.
3. They are ONLY using their own money to open a trading account with a
foreign based broker and they are trading their own account.
4. They are not trading for someone else account.


Is this considered legal or illegal?



Please end all these confusion and let us put the matter to rest. I really
thank you for your time and response. I hope with your reply / response
this confusion will end and peace will return.




Thanks,
Jey.

The above is the latest email exchange between me and BNM. BNM's response is in red and bold. I am leaving all the BNM email address there, so if anyone want to confirm if above is true or not, please feel free. So finally we have the burning question answered.

whats up guys...this might not be a main solutions but i heard ahem ahem..citi have their own platform..but min is usd10k..ahem..ahem..

CitiFx does offer MT4 for spot fx trading but i am not too sure our local Citibank in M'sia offers the service. If they do , then this will be the first legal avenue for fx traders in Bolehland.

Otherwise ...

To me, as usual it is just a statement.

The said borrow money from AhLong is illegal, yet there are AhLong all over the country. (and the borrowers)

They said do not invest in quick rich scheme, yet almost everyday I got flyers and spam mail.

It is just a statement.

just a statement

a statement

Yes of course, its just a statement. No big deal.
If caught tomorrow, then its just a fine of Rm 1 million.

So what? Its just a fine. No big deal.
And also a prison term of 5 year. Just 5 years, so what right?

Of course no big deal. Its just a statement. $emuanya OK.
Cool.

Also going by the same logic, the Police also says that murder is a crime and so is drug pushing. Both are punishable by death. But since everyday there is news that somebody is getting murdered and there are a lot of drugs being pushed - so its ok to do it? Its only a statement.

Luckily I do not do the transactions in Bolehland! I subject to US law and Regulation.

hey jey
Bank Negara Malaysia response is correct within law of boundry.
for FXCM or FXDD to buy/sell of foregin currency(Physical Currency) in boundry of BMN require permission from BNM.
In every country this is applicable. and every central bank will give same response like BNM.

Main question is ......what is EURUSD ??? is it Currency or it is instrument ??.
if you ask BNM this question they will say EURUSD is not foregin currency.

should we maybe offer BNM a scenario case analysis?

like Malaysian A, has FX trading account in Singapore, regulated by MAS. Converts MYR to SGD and wires SGD to Singapore to fund account. Trades g7, non ringgit crosses. Makes SGD 3,000 trading. Profit is kept with Singapore bank. Remits SGD 3,000 back to MYR with Malaysian bank which is an authorised FX dealer. Profits is withdrawn in MYR from local ATM.

Is this illegal?
would keeping the profits in SGD with a Singaporean bank and going to Singapore to spend the profits there be illegal as well? or withdrawing SGD in Singapore and bringing SGD back to Malaysia to convert to MYR.

The statement is so vague. I think it was intended to be vague, because they have not worked out the chinks yet.

i agree.

BNM;s ECA act is so vague. From what i read resident is not allowed to trade "IN" Malaysia. So are we trading in Malaysia, also trasaction is in overseas, but our instruction is from Malaysia thru our pc??

To ramdas, i think EU is currency (in fact two currency , i.e. if u buy EU, ur are buying EUR selling USd, thus trading 2 currencies) not instrument.

There are various reasons that the BNM are doing what they are doing. One is the scamsters, the other is to control the market in Malaysia. And last but not least, for religious reasons. There is a fine line between FX trading and gambling. That being, the uneducated trader is gambling. Which is against the islamic religion.

I am not against anyone or anything, but BNM has both political and religious interests infront of them. And pressure from both sides.

Exactly, if EU is not considered two currencies, then we probably need not call ourselves as forex traders. Might as well call ourselves instrument traders.

This is more than just semantics. Or which loophole to hide in. Lets not look for loopholes to kid ourselves. The right thing to do is to meet the problem heads on and try to find a solution. Any other way, is called escapism.

Talking about escapism, there is an idiom in the Malay language which goes like this "No matter how cleverly the squirrel jumps, one day it lands one the ground still". Familiar?

Isn't forex futures an option for Malaysian traders? Is it allowed in Malaysia?

ur so right!

Thanks Jey!

1. I've read BNM's reply very carefully and note that they said "buying and selling of foreign currency", "foreign currency" and "in Malaysia".

2. "Foreign currency" (not "foreign currency assets"), in central-bank-speak, usually means "cash", speaking from my experience as a banker. IF it also means trading on margin, they have not really said so in their own words (based on the purported replies from BNM as per Jey's post), as far as I can see. Sorry Jey!

3. Note that for most retail traders (not interbank traders), when we "buy" USD100K against yen (for example), we're not really buying actual 100k cash. We are trading on a "notional" or "face" amount 100k. And we're betting on the difference in value. (Even the credit equivalence is not the same i.e. we're not expected to actually DELIVER the 100k hence the use of the swap market to rollover the positions.)

4. It is TRUE that overseas brokers cannot deal in foreign currency. Of course! FXCM cannot buy or sell physical foreign currency cash in this country. Only Authorised Dealers can do that.

5. FXCM only act as brokers. Brokers arrange deals between counterparties who do the actual buying and selling. Brokers do not actually offer foreign currency (CASH!) for sale or purchase. What they do offer is the ability for investors to participate in the movements of the relative values of currency PAIRS i.e. instruments.

6. Therefore, nothing that BNM wrote in that email reply (if it was really written by qualified personnel) is false i.e. I AGREE WITH WHAT THEY SAID. It just has to be read carefully and within a particular specialist and historical context.

7. I see that certain name-less forex "players" complained in the papers on Jan 9th about being painted with the "evil" brush. (a commendable effort, but they should not have wasted their breath, by the way.)

8. I think it is strange that BNM has not responded to this article via the same Press. It has been a week already. hmmmm. I hope someone can show me if I'm wrong about this.

9. With apologies to Jey, the email reply he received doesn't address the fact that ECM9 is still in force and has not been officially superseded by any new circular. It doesn't explain why BNM has not responded directly AFAIK to the news article last week about the disgruntled forex traders with a fresh press article of their own. It doesn't explain why no independent day-trader has been prosecuted to date; only the scammers were caught.

10. As I see it, there are a few choices. If traders here have read BNM's purported email reply to Jey and feel they cannot take any more chances, they should stop trading right now. They might even wish to follow Jey's crusade to fight for their rights as traders or as he says, to "meet the problem head-on and try to find a solution." (I think thats what you wanted to do in another thread, right Jey? Because we all thought you have already posted your last message on this thread.)

11. For the rest of us who only wish to follow properly-read gazetted Laws and circulars (not email responses), well, we will of course do what is best for ourselves at the end of the day. We make our own beds, as some would say. And we thank Jey very much for his words of caution.

12. Most importantly, traders here should check with BNM themselves using the email addys provided by Jey and satisfy themselves that BNM is not engaging in double-speak while taking into consideration all of our responses/interpretations in this thread.

13. Thanks again to Jey for his effort.

1. Interesting idea!

2.BNM's function is not really too complicated to explain. If you read their Roles and Functions, their main tasks (among many) is the prudent conduct of monetary policy and preserving the purchasing power of the ringgit.

3. One of the things that being prudent means is not saying or doing things that are seen as encouraging speculative behaviour.

Another way of saying it:

A statement without prosecution is just a statement.

At least Ahlongs and get-rich-quick scammers do get their 15minutes of fame when they get caught.

Has any day-trader ever been prosecuted, I wonder...

What we need is a high profile lawsuit to prove this point!