Binary Options trading in Malaysia
Malaysia is a next door neighbour to Singapore, Asia’s largest financial hub. However, the conduct of financial market affairs in Malaysia does not mirror what is available across the border. Regulation of the binary options market is not clear-cut, and traders in Malaysia need to understand what the situation really is in terms of where they can trade binary options.
The regulation of all aspects of Malaysia’s financial markets is not vested with one agency or body. Overall control of the markets rests with the Malaysian Central Bank known as the Bank Negara Malaysia. However, regulation of the various financial markets rests with various bodies, which include the Securities Commission and the Financial Markets Financial Association of Malaysia (FMAM).
Malaysia bore the brunt of speculative attacks on the Malaysian Ringgit during the 1997 Asian currency crisis.
As such, the Bank Negara Malaysia has assumed a hands-on approach on how the financial markets and transactional flows within these markets are performed. This has implications on how money is remitted across borders by Malaysian binary options traders.
With regards to licensing, a form of confusion existed in terms of classification of binary options. The existent laws prior to 2007 provided for regulation of the following products:
- Exchange-traded derivative products
- Specially structured products, which were basically derivative products structured as securities and offered by banks.
- OTC derivative products, which were not captured under any of the provisions of the existing financial regulatory laws.
This was an inadvertently created situation. At the time these laws were initially passed in Malaysia in 1993, there was nothing like retail binary options. The internet was still under development, and majority of the world’s trading activity were closed off within borders. Retail cross-border trading activity was non-existent.
With the development of new technology and creation of new investment products, it became clear that the existing laws could not accommodate the rapid evolution that had taken place in the world of financial trading. Malaysia was forced to revisit its investment laws to attempt to keep pace with modern trends.
As positive change was the amendment of the Capital Markets and Securities Act of 2007 to change the definition of OTC derivatives and bring them under regulatory control.
Currency Pairs & Spread
The Malaysian Ringgit is not featured on most binary options platforms. However, currency pairs like the Singaporean Dollar and other Asian currencies are featured. It is easier for Malaysian binary options traders to trade commodities, currencies and stocks from companies located in South East Asia, as there is likely to be more familiarity with these assets than assets from Europe or the Americas.
Most platforms used by Malaysian binary options traders are those of offshore brokers, which are mostly of the turnkey variety. Therefore, platforms designed by SpotOption, Tech Financials, O-Systems, Tradologic and Hello Binary, are the commonest platforms that will be used by Malaysian traders.
Malaysian traders who trade with binary options brokers located in Seychelles, Belize, Mauritius, Vanuatu and St.Vincent & Grenadines, will be offered trading bonuses. Bonuses will not be offered by CySEC-regulated brokers as these have been banned by CySEC.
Deposit and Withdrawal Options
Malaysian law requires that foreign remittances above $10,000 be submitted for approval by the Bank Negara Malaysia. This puts some control on what transaction methods can be used by Malaysian binary options traders.
- Cards: Cards issued by MasterCard and VISA are the accepted card brands for top Malaysian binary options brokers in offshore locations.
- Bank wire: Transfer of funds, subject to the imposed $10,000 approval and limitation from the Bank Negara Malaysia, can be performed.
- Malaysia has a preponderance of digital wallets that can be used to transact on binary platforms. These include international wallets such as Skrill, Neteller, OKPay and Perfect Money. Local digital wallets include MyanPay, YuuPay, Automate Pay and Digital Currency Exchange.
Legality & Regulations
Up until 2011, the only recognized OTC derivatives exchange in Malaysia was the local Kuala Lumpur Commodities Exchange, where trade of futures of crude palm oil was carried out. The development of new financial products in the global financial markets and the explosion of technology which enabled online trading of various kinds of derivative products all over the world led the Malaysian government to re-design the laws permitting OTC derivative trading in Malaysia. The new law, which was an amendment of the existing Capital Markets and Services Act of 2007, proposed to bring OTC derivatives fully under the regulatory oversight of the Securities Commission.
This requirement now mandates all Malaysian companies offering OTC derivatives (including binary options) to acquire a license to be able to keep offering these products to Malaysian citizens
Presently, no company has registered with the Securities Commission to obtain a binary options license. A few primarily offshore companies have however, opened shop in Malaysia to offer forex trading services. Some of these companies (e.g. Hirose UK) have binary options applications servicing other markets. It is therefore expected that they may decide to offer binary options to the local populace, once they have tested the waters of the local market for profitability.
What are the most frequently asked questions about Malaysia binary options brokers and the market in general?
- Are binary options legal in the Malaysia?
Answer: The trading of binary options is legal in Malaysia, provided trading is conducted with binary options brokers who have obtained an OTC derivatives license.
- Who regulates the financial markets (including binary options) in Malaysia?
Answer: The Securities Commission regulates the OTC derivatives market in Malaysia, but the Bank Negara Malaysia provides overall regulation of the financial markets and payment systems in Malaysia.
- As a citizen/resident of Malaysia, am I allowed to trade binary options with offshore brokers?
Answer: There are no laws enforcing the prohibition of trading of binary options with offshore brokers, probably because no companies have taken up licensing with the Securities Commission. How long this would remain the case remains to be seen.
- What is the official designation of binary options brokers in Malaysia?
Answer: Binary options brokers in Malaysia are deemed to be OTC derivative issuers, and are required to be licensed if operating within Malaysia.
- Are there any Malay or Mandarin language binary options brokers available?
Answer: Some of the brokers listed below offer binary options in Malay, Tamil and Mandarin to accommodate the local populace.
Best Binary Options Brokers in Malaysia
There are no binary options brokers with a physical presence in Malaysia. All trading is therefore done with offshore brokers. Here is a list of binary options brokers which will not only provide Malay and Mandarin language options, but also give Malaysian traders several options for depositing and withdrawing funds fast. The top binary options brokers are as follows:
The binary options market in Malaysia is still dominated by the marketing presence of offshore brokers. The designation of binary options as OTC derivatives is a step in the right direction and will promote development of the local content in the brokerage business. However, this may take some time as Malaysian traders adjust to the new reality and await the entrance of more companies with binary options products suited to the local environment.