How to Legally Start Forex Trading in the UAE
Forex trading is fully legal in the UAE, and is regulated by the SCA, DIFC, and DFSA:
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Forex trading is considered halal as long as it doesn’t involve riba or gharar, meaning no swap-fees or excessive speculation
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To start trading Forex in the UAE, learn about Forex before selecting a reliable broker that is regulated by the UAE’s SCA, or approved if they’re an international broker.
The United Arab Emirates (UAE) is a global financial hub that’s home to some of the world’s richest and fastest developing cities, billions of dollars per year in foreign investment, and a high-income developing market economy. This thriving economy, paired with freedom from taxation, is largely why millions of people from around the world move to the UAE, with 88.52% of the population being expats.
With so many people flocking to the Emirates, wealth has inevitably followed, as investors seek to capitalize on the opportunities offered by the UAE’s financial prosperity. As a result, Forex trading has massively grown in popularity in the country. But what are the legal considerations for anyone hoping to trade Forex in the UAE? Is Forex legal in the UAE? Does Islamic law prohibit Forex trading in the UAE? These questions, and more, will be answered in this article.
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Is online trading allowed in UAE?
Yes, the UAE has a well-established financial sector and regulatory framework that permits online trading, and trading is popular among residents. However, the regulations are strict and Forex is tightly monitored by the Dubai Financial Services Authority (DFSA), Financial Services Regulatory Authority (FSRA), and Securities Commodities Authority (SCA).
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Is Forex available in Dubai?
Yes, Forex is available and very popular in Dubai, and in the entire UAE. There are plenty of Forex brokers based in Dubai. Forex trading is available to both residents and non-residents, whether they are individuals or institutional investors.
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How to trade Forex in UAE?
The process is much the same as anywhere in the world except for the regulatory bodies involved. Learn the basics of Forex, then choose a reputable and reliable broker who is regulated by the Securities and Commodities Authority (SCA) in the UAE or offers accounts to UAE residents if an international broker. Then open a trading account, develop a trading plan, and choose a platform. Then you’re ready to start practicing with a demo account or deposit capital to begin trading!
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Do Forex traders pay tax in UAE?
No. Generally, UAE residents don’t pay any income tax (which is partly why the population is 88% expats). This extends to capital gains, so any profit generated from Forex trading does not incur taxes for UAE residents.
Is Forex Regulated in the United Arab Emirates?
Forex trading is heavily regulated in the UAE by several regulatory bodies. Each one is responsible for specific aspects of the UAE’s economy or financial markets, or for regulating financial activity in particular areas. Therefore, if you’re engaging in Forex trading, you may be dealing with different financial authorities depending on where you’re based and your activity.
The Securities and Commodities Authority (SCA) is the primary regulatory authority responsible for overseeing securities and commodities markets in the UAE, operating at the federal level. The SCA oversees any financial product operating in the UAE, so internationally registered brokers offering their services inside the UAE would need to be SCA-approved.
The UAE has been historically strict regarding trading. For example, it only legalized shorting stocks several years ago. Now, as the UAE adapts to a globalized economy, it has lessened restrictions on trading, except for requiring UAE brokers to offer options for complying with Sharia law (more on that later).
If you’re trading from one of the UAE’s two major cities, Dubai or Abu Dhabi, then local brokers will be regulated by additional bodies:
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Within the Dubai International Financial Centre (DIFC), which is a financial free zone in Dubai, the Dubai Financial Services Authority (DFSA) regulates Forex brokers and trading.
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But within the Abu Dhabi Global Market (ADGM), another financial free zone in the UAE, the Financial Services Regulatory Authority (FSRA) oversees financial services and activities. It regulates financial institutions, including Forex brokers, operating within the ADGM.
Both the DFSA and FSRA are responsible for policing all financial activities, anti-money laundering, and counter-terrorist financing in the DIFC and Abu Dabhi.
In addition to all of that, the Central Bank of the UAE provides exchange rates for over 70 currencies from around the world. They also directly intervene to maintain stability of the UAE dirham peg against the US dollar, and their decisions can impact inflation and interest, which both contribute to currency exchange rates.
There aren’t any regulations that would seriously impede a retail trader's ability to trade Forex, though most Forex accounts provided by Forex brokers in the UAE would be Islamic accounts, which follow different restrictions and rules than regular Forex accounts.
Forex trading through a broker that is regulated in Dubai
Any broker operating out of the UAE will be regulated by one of the financial authorities mentioned above, that is, either the SCA, DFSA, or FSRA. Trading through a UAE-based broker provides a level of security and transparency for UAE-based Forex traders, and ensures compliance with Islamic law for Muslims.
The UAE strictly prohibits unlicensed entities from engaging in Forex or online trading. This is in accordance with Article 6 of Law No. 13 of 2011 in Dubai and Article 328 of Federal Law No. 2 of 2015. Any foreign company wishing to operate in the UAE must obtain the proper license from regulatory bodies such as the SCA, DIFC, ADGM, or other regulated free zones.
Trading through an internationally regulated Forex broker
Trading through an internationally regulated Forex broker offers several advantages for traders in the UAE. These brokers are usually regulated by reputable international regulatory bodies such as the Financial Conduct Authority (FCA) in the UK or the Cyprus Securities and Exchange Commission (CySEC) in Cyprus. Most of the world’s big Forex brokers are approved in the UAE, but it’s always safest to double-check that your chosen international brokerage is permitted to operate in the country.
There are several advantages to opting for an internationally regulated broker:
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Enhanced Regulation: International regulatory bodies like the FCA and CySEC are known for their stringent regulatory standards and strict enforcement measures.
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Investor Protection: Trading with an internationally regulated broker offers enhanced investor protection compared to unregulated or offshore brokers.
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Trust and Reputation: International regulatory oversight enhances a broker's trust and reputation in the industry.
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Access to Global Markets: International brokers often offer access to a wider range of financial markets, including Forex, stocks, commodities, and cryptocurrencies.
According to Igor Krasulya, TradersUnion expert: Although international Forex brokers may be well known and popular, you should be careful and cautious as there is a risk of opening an account with a dubious offshore broker.
To help you avoid making such mistakes, we have written an article: What Are The Risks Of Trading With Offshore Brokers?
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Is Forex trading haram or halal in the UAE?
Although the UAE’s population is multicultural and diverse with over 88% of it being expats, Islam is still the official and majority religion in the country, and 76% of the population is Muslim. The legal system of the UAE is a mixture of civil law and Sharia (Islamic) law. Under Sharia law, there is still much ongoing scholarly debate on whether Forex trading is halal (permissible) or haram (not permissible).
Forex trading is considered haram by some Islamic scholars because it involves the concepts of ‘riba’ (interest or usury) and ‘gharar’ (speculation). To comply with Islamic law, many brokers globally offer Islamic accounts that adhere to Sharia-compliant practices, such as providing swap-free accounts that eliminate overnight interest charges.
All Forex brokers operating out of the UAE are required to adhere to the country’s Sharia laws which determine the legality of Forex trading, by providing Islamic accounts. It is not a legal requirement for traders to use an Islamic account, but all brokers in the UAE offer these specialized “swap-free” accounts.
How can I become a Forex trader in Dubai?
So, you’ve made the decision to start trading Forex in the UAE. What are the next steps?
Firstly, ensure that you fully educate yourself on Forex trading before diving in. Conduct thorough research and ensure you have a comprehensive understanding of the market. Make sure you are fully compliant with UAE law, and then follow these steps to get started:
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Choose a Reliable Broker: Select a reputable Forex broker that is regulated by a recognized local authority such as the SCA or an international regulatory body like the FCA or CySEC. Ensure the broker offers services in the UAE and supports trading platforms that you are comfortable with. Once you've chosen a broker, open a trading account with them.
Setup Platform: Fund your trading account with an amount you are comfortable trading with and then download and install the trading platform provided by your broker, or a different one if it's compatible with your trading account. Familiarize yourself with the platform's features and functionality. MetaTrader5 (MT5) is one of the most popular trading platforms and is legal in the UAE.
Trade, Control: Develop a trading plan and practice it on a demo account. Once you feel confident with your skills and strategy, you can start trading Forex pairs. Remember to start with small position sizes and gradually increase as you gain experience. Continuously monitor the markets and analyze price movements, economic indicators, and geopolitical events that may affect your trades.
Is Forex a Scam?
No, Forex itself is not a scam. It's a legitimate form of trading where currencies are bought and sold in the global marketplace, by individual traders and financial institutions, with oversight by authorities and government bodies in most jurisdictions. With an average daily volume of $7.5 trillion (in 2022), the whole financial market can’t be a scam.
However, if you don’t understand what you’re doing, and trade without the necessary knowledge or strategy, it could feel like a scam, as you’d likely incur losses. On top of that, there are Forex scams out there, which you should learn and be vigilant about. We explain the concerns surrounding Forex’s legitimacy in greater detail in this article: Is Forex Legit? Is Forex Trading Legal in Your Country?
Summary
In conclusion, Forex trading in the UAE is both legal and accessible, with strict regulations enforced by various financial authorities such as the Securities and Commodities Authority (SCA), Dubai Financial Services Authority (DFSA), and Abu Dhabi Global Market Financial Services Regulatory Authority (FSRA). Traders often need to ensure compliance with Islamic law, particularly regarding halal and haram practices, by opting for Islamic accounts offered by regulated brokers.
Before beginning Forex trading in the UAE, check that your chosen broker is compliant with local laws, for your own protection and for increased transparency and safety.
Team that worked on the article
Jason Law is a freelance writer and journalist and a Traders Union website contributor. While his main areas of expertise are currently finance and investing, he’s also a generalist writer covering news, current events, and travel.
Jason’s experience includes being an editor for South24 News and writing for the Vietnam Times newspaper. He is also an avid investor and an active stock and cryptocurrency trader with several years of experience.
Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO).