Choosing a regulated broker in UAE

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When choosing a forex broker, you should always choose a regulated broker for your area. If you are in the United Arab Emirates (UAE), you should choose a broker supervised by one of the four recognized financial authorities for the region. Selecting a properly recognized broker ensures that the broker is legally able to offer its trading services in the UAE and meets the financial standards set by the region’s regulator.

To offer their trading services in UAE, forex brokers must use one of the following regulators,

● Dubai Financial Services Authority (DFSA)

● Abu Dhabi Global Market (ADGM)

● Central Bank of the United Arab Emirates (CBUAE)

● The Commission des Valeurs Mobilières (SCA) Authority

With four different regulators in the UAE region, it can be helpful to know the differences between each regulator and how they protect you.

Why choose a regulated broker in UAE

If you are located in the United Arab Emirates, it is important to choose a broker that has a site with one of the financial regulators in the United Arab Emirates region, as this ensures that you can legally trade with them. Justin Grossbard of CompareForexBrokers says that while many brokers use respectable regulators from other countries such as Australia (ASIC), UK (FCA) and Europe (CySEC, BaFIN), unless those brokers use also one of the four UAE regulators, to operate in the UAE they will still need local regulation.

Regulators protect you by putting in place safeguards so that you don’t lose your investments. This means defining the policies and practices that the broker must follow, they are guarantees to give you confidence in the broker and to protect you. One of these guarantees is the requirement that your funds be kept in a separate account based in the United Arab Emirates. Using a separate account means that the broker cannot access your funds and thus gives you full control over your finances.

Another regulatory requirement is that the broker regularly submit their financial books for review. This ensures that the broker does not risk becoming insolvent and therefore putting his client’s funds at risk. Brokers must have a minimum capital reserve to ensure that the worst does not happen.

Brokers are also required to document their trading practices and processes. This not only helps ensure that customers know what they are getting for their products, but also enables the regulator to enforce these practices. Having a documented system ensures that the broker’s operations are honest and transparent. An example of this is an established local complaints process, which allows customers to exercise recourse for any dispute.

Using a regulated broker means that the broker must have optimal security so that your data remains private and secure, not hacked or used inappropriately. Brokers will also be required to follow Anti-Money Laundering Practices (AML) and Know Your Client’s Practices (KYC).

Sharia

The United Arab Emirates being a predominantly Muslim country, the country respects Sharia law. Regulators are able to ensure that brokers comply with Sharia requirements. This means that the financial accounting practices comply with the requirements of Islamic law.

Continental UAE vs free zone

The seven emirates are made up of two types of regions, the continental zones and the free zones. All of the UAE is considered continental except for 52 free zones which have designated zones set aside to encourage foreign investment in the UAE. If these free zones, two of them are of interest to forex brokers, the Dubai International Financial Center (DIFC) in Dubai and the Abu Dhabi Global Markets (ADGM in Abu Dhabi).

Companies can choose to set up as a “mainland” company inside or outside the free zone or as a foreign-invested company in the free zone.

Continental companies

Forex brokers who wish to do business directly with the local market should establish themselves as a mainland company. To do this, the company must have 51% local ownership, however, this means maximum freedom to deal with local markets.

Since these brokers serve local markets, these brokers must have a local office that benefits you as that means local customer support.

One of the requirements to be a registered broker on the mainland is that

Forex brokers who choose this structure must be regulated by the Central Bank of the United Arab Emirates (CB UAE) or the Securities and Commodities Authority (SCA).

Continental businesses and Islamic accounts

Since continental companies are aimed at local markets, it follows that the products of continental brokers must be tailored to domestic customers. For this reason, mainland businesses must or are more likely to offer a swap-free account that strictly adheres to Sharia law.

Swaps are a form of interest or a Riba and although many companies in the FTZ offer swap-free accounts, they do not necessarily strictly follow Sharia law since they replace netting with other means. It could be wider spreads or administration fees.

Securities and Commodities Authority (SCA)

The SCA is the financial regulatory authority of the United Arab Emirates for the trading of derivatives. It is the body that sets the guidelines that other financial regulators must follow for securities and futures trading. While other regulators like the DFSA and ADGM FSRA may set their own rules, they must work within the parameters set by the SCA.

Central Bank of the United Arab Emirates (CB United Arab Emirates)

The CB UAE is responsible for protecting the financial integrity of the UAE. Currently, they regulate forex brokers across the UAE, but they will transfer this responsibility to SCA in 2022.

UAE Free Zones

The UAE government has set aside free zones in Dubai and Abu Dhabi to attract foreign investment. Foreign companies are attracted to locate in free zones through a series of UAE government initiatives that adapt to a more western business environment. The initiatives include free zones having:

1. Possibility to set up an office with 100% foreign ownership

2. Their own judicial system and their own courts are competent in corporate, commercial and civil matters within their respective free zone.

3. Laws are written in English

Dubai Financial Services Authority (DFSA)

The DFSA is the financial authority of the Dubai International Financial Center (DIFC) in Dubai. This free zone is the largest financial center in the UAE, so it is a popular choice for forex brokers to locate. As a result, you will find that more UAE brokers offer DFSA regulatory protection than other UAE financial supervisors.

Abu Dhabi Global Market Financial Services Regulatory Authority (ADGM FSRA)

The ADGM FSRA is much the same as the DFSA, except that it regulates the Abu Dhabi free zone of global markets. Unlike the DFSA which was founded in 2004, the ADGM has only been operating since 2015 and is therefore not yet as established. However, the growth rate of ADGM is faster than DIFC, so over time ADGM should become more prominent.

Conclusion

When you choose a forex broker, as long as the broker is regulated by one of the DFSA, ADGM FSRA, CBUA or SCA, you can trade safely in the United Arab Emirates. If you are looking for the widest range of brokers to choose from, look for a broker regulated by the DFSA, while if you want to be sure that the broker has a full Sharia-compliant product and has a local presence, look for a broker. regulated on the continent.

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