Securities Commodities Authority (SCA) of UAE is the regulatory authority for governing all non-banking financial activities including but not limited to forex trading, CFD and other online activities. SCA’s primary objective is to enhance the capital market and stimulate economic growth of the UAE. They are attracting foreign investments by offering a steady channel and environment to invest in forex. Besides, Central Bank of UAE also regulates all forex brokers, whereas SCA issues the licenses.
In parallel with SCA, UAE also has two financial free zones namely Dubai International Financial Centre (DIFC) in the Emirate of Dubai and Abu Dhabi Global Market (ADGM) in Abu Dhabi offering activities of Forex Trading, CFD and other online non-banking financial trading. Dubai Financial Services Authority (DFSA) in DIFC is an authority explicitly established to regulate forex brokers or companies performing non-banking financial activities incorporated in DIFC.
It is undoubtedly legal to trade in forex through local brokers regulated by SCA, Central Bank or other regulatory authorities. Pertinently, any natural or legal person willing to offer such non-banking financial services within UAE must establish an entity in the country either in the mainland or in any financial free zone as referred above, in accordance with the laws and regulations of the country. UAE strictly prohibits any entity dealing in forex or another online trading without having a proper license in UAE, obtained through appropriate channels. This is in accordance with Article 6 of the Law number 13 of 2011 regulating Economic Activities in the Emirate of Dubai and Article 328 of the Federal Law Number 2 of 2015 concerning the Commercial Companies Law which confirms that any foreign company cannot conduct activities within UAE without obtaining a proper license. Ergo, the company to provide Forex and CFD services in UAE must primarily obtain a permit from either SCA, DIFC, ADGM or any other regulated free zone offering such activities.
UAE offers a variety of business registrations for foreign investors willing to register for forex trading. Considering it is a regulated activity in UAE, obtaining a license from any free zone would not suffice your purpose. Below are the most prominent regulated options for establishing a forex trading company in UAE:
Option-A (UAE Mainland Company)
As afore-mentioned, a forex trading license can be obtained by setting up a mainland company in UAE. Department of Economic Development (DED) in Dubai and in other respective Emirates is the authority issuing licenses for all sorts of companies in mainland. Following are the business activities offered by Dubai mainland for forex trading and other online trading:
- Foreign Shares and Bond Brokers;
- Foreign Securities Promotion;
- Remittance of local and foreign currencies;
- Brokerage in commodities listed in foreign markets;
- Brokerage in securities listed in foreign markets.
Nevertheless, the license for a mainland company mandates the foreign investor to have a partnership with a UAE national who shall hold minimum 51% shareholding in the company, however, this shareholding may vary depending upon the type of the company. In furtherance, unlike free zones Company, UAE mainland companies are privileged to access UAE markets and all customers freely.
Along with the license from DED, the investor is required to obtain a subsequent approval from SCA, whereas the company and its services will be regulated by Central Bank of UAE.
Option-B (Free-Zone Company)
Mandatory requirement of partnership with UAE local sponsor is what majorly differentiate a mainland company from a free zone entity. Accordingly, two significant free zones offer licenses for forex trading that is DIFC and ADGM as they are categorized a financial free zone by the government of UAE. Nonetheless, the trading companies established in free zones are restricted to approach the local market for trading directly. In addition, these financial free zones have their own rules and regulations and even regulatory authorities governing non-banking financial services providers.
- DIFC (Dubai International Financial Centre)
Operated through an independent regulatory authority and having its own legal system is what differentiate DIFC with other free zones in UAE. Service providers in DIFC will be governed by the DFSA (Dubai Financial Services Authority). DIFC offers a wide range of activities to foreign investors with 100% ownership and 0% taxation allures foreign investors to establish their presence in DIFC.
- ADGM (Abu Dhabi Global Market)
In similar lines with DIFC, ADGM is the financial free zone in Abu Dhabi having almost similar characteristics and provisions as compared to DIFC. ADGM FSRA (Financial Services Regulatory Authority) regulates all non-banking regulated activities for online trading.
Option-C (Representative Offices)
Lastly the company can opt for registering a representative office in any of the free zone available, wherein the most common and affordable for such activity is DMCC (Dubai Multi-Commodity Centre). This option is best suited for those who would require presence in Dubai without explicitly applying for Forex Trading License. It is further pertinent to note that the holding company shall be undertaking similar activity in other country in order to obtain license for representative office.
Majorly, DMCC offers two types of activities in forex trading as follows:
- Trading in Forex, OTC and Exchange Traded Derivatives- explicitly involving in activities based on trading in own money in Forex or OTC with counterparties regulated by authorities approved by DMCC.
- Trading in the proprietary account on regulated exchanges: involving companies dealing with trading in their own money in Forex or OTC on account of regulated exchanges.