The Forex market found its way even in the Islamic countries. The United Arab Emirates are a host to many Forex brokers who keep Arabian, and other traders occupied and entertained. Forex is truly a global market because it spread throughout all countries in the world, and it can be officially declared that Forex mania took over. The modern western world used to perceive the Arabic world as strict and limiting in many ways, it still does, but then Dubai happened and the world seemed to have shaken off some of their prejudices. I can only imagine the surprise of many when hearing that the Islamic world embraced the Forex market. The economy of the UAE relies mainly on revenues from oil and accounting for over 80% of the country’s exports. Therefore, the economy is not very diversified with the exception of Dubai. The UAE economy is the second largest in the Arabic world, right after Saudi Arabia. This indicates that the economy provides normal conditions for Forex traders as well. The national currency is the UAE Dirham (AED) and is weaker than the US dollar (1 USD= 3.67295 AED).
The Forex market has been developing steadily in the UAE. Further on, finances are handled somewhat different in the Islamic countries which are run under Islamic banking practices. Islamic Forex trading is mostly famous for swap-free or no rollover-fee for holding positions over night. Islamic finances are more focused on economic and social development, rather than profit since their financial conduct is closely related to the religious Sharia laws which dictate the rules (focus is on ethical approach and behavior). Islamic finances must contribute to the Islamic community. The main features of Islamic finances are prohibition of interest rates, high risks and gambling, which are common in the western world. Therefore, it is a little bit surprising that Forex took off with ease in the UAE and the Islamic countries in general, given the nature of the market which contradicts the Islamic rules to a certain extent. Still, it is a legal market with some adjustments made, and national and international investors are free to trade under the supervision of the SCA.
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The SCA Defined
SCA or the Securities and Commodities Authority of the UAE is the regulatory body for the non-banking financial sector including Forex. The body was established in 2000. Their goals include enhancing the capital market and stimulating national economic growth. Their scope of duties includes protection of investors, fair practice, market efficiency, proposal of relevant legislation, raising awareness, investment development, etc. The main values that the SCA fosters are:
- Fairness and equity; safe transactions, protection of all parties involved
- Transparency; fair information and data distribution among all capital market participants
- Cooperation; building and fostering of partner relationships of mutual benefit to enhance the capital market in general
- Innovation; creative and innovative ideas to spur efficiency, and implementation of standards of excellence
The SCA wants to attract investments by offering a stable investment and capital environment. It also tries to implement quality, efficient and transparent administration procedures according to best practices. The SCA also gradually builds up or creates a culture of innovation within the capital environment.
The SCA and Forex Market
Forex has taken off in the UAE, which is not a surprise given that many wealthy people live in the country and they are looking for new ways to profit from their investments. Of course, many international Forex broker companies seized the opportunity to open regional offices in the UAE with the goal to attract wealthy Arabs with the lucrative business idea. Still, traders have to take care to choose a licensed broker, most ideally registered with SCA. For example, it is known that in Dubai, many Forex brokers run their businesses without licenses. We all know that the majority would probably look first to register with a Dubai broker, but that is not always the best decision. The market is still not fully monitored and under control, and unlicensed brokers use the decentralized market to their advantage anywhere they can, especially where regulation is not 100% in place. If you want to sign with a famous broker in UAE, many famous global brokers are present in the country too. Maybe it would be the best to choose a familiar broker with a UAE office. In that way, you will be safe to trade and have access to the Middle East market. Maybe your strategies will work better in a new market – you can’t know until you try. The best international brokers have obtained the national license of the country and comply with their rules and regulations. Brokers have (at least in theory) a duty to register with the national authority of the country they are doing business in. This is an important feature for traders, granting them legal protection under the law. If you have the courage to trade in an international setting in a foreign culture, then please, take measures of precaution.
Growing International Interest
The UAE, especially Dubai, acquired an international status, and they rely on international partnerships and collaboration in many economic aspects. Therefore, it is no surprise that many Forex brokers opted to extend their services to the UAE, who welcome internationals with open arms. They are guest-friendly and open to new business ideas. It could be a real adventure to trade in an exotic market like the UAE Forex market. Moreover, an additional plus is that European and American broker companies can be easily found. This is especially appealing to adventurous traders who always want to try out new markets.