The foreign exchange market, or Forex, is the largest market in the world in terms of the daily trading volume. Especially with the help of the internet, individual traders now get easy access to the foreign exchange market through international banks or brokers.
The GCC Forex market has surprised the world, as it has grown from humble beginnings to a trillion dollars industry in recent years. Forex traders here are trading in the same sectors as in London, New York and Tokyo, but the overall trading volume is increasing far more rapidly.
And amongst the region, the UAE stands out particularly due to its relatively well-developed financial system and continuous efforts in building up a business-friendly environment. This article explains the different ways you can structure a Forex Trading company in the UAE.
Forex Trading in the UAE
The UAE was the first country that established supporting infrastructure for the financial sector in the region. It provides both local and international investors a comprehensive regulation system and flexible operation choices with various types of legal entities.
Despite religious law and economical differences, the country has been implementing a more Western-style business model that is welcoming towards foreign investors as well as diversifying investing routes. During recent years, the UAE has successfully reduced its dependence on oil and petroleum products. The main sources of revenue are tourism, real estate, aviation, and most significantly financial services.
With a world-class infrastructure, business-friendly environment, mature legal and regulatory system, the UAE has attracted a number of foreign investors to come here and establish their forex companies or branches.
Available Forex Trading Companies in the UAE
There are a number of forex brokerage business registrations available. If you are interested in offering Forex trading services in the UAE, know that this is a regulated activitiy. You cannot just register with any free zone. We explain the three regulated options first.
But keep reading, because we also reveal the option of establishing a foreign branch in a normal free zone without a regulatory burden, and what you can do when you trade with your own money.
There are 3 regulated routes available to you: Mainland Company, ADGM and DIFC.
Anyone familiar with conducting business in the UAE should be aware of its Mainland Company structure, especially its 51% local ownership requirement. However, it is undeniable that a Mainland Company provides you with the maximum freedom to access local markets and customers.
Any mainland company that intends to provide forex trading services are regulated by the Central Bank of the UAE, and licensed by the Securities and Commodities Authority (SCA).
Free Zone options
The UAE government also offers several options for potential investors to set up a financial business in the region but retain 100% ownership of their businesses. Both ADGM in Abu Dhabi and DIFC in Dubai are exclusive economic zones for financial companies, such as forex trading. The only limitation for Free Zone companies is that they are not allowed to directly trade with the local market.
UAE free zones have their own registration regimes, practices, and procedures. Some of them even have their own regulatory body and courts for services providers of regulated activities.
1. Abu Dhabi Global Market (ADGM)
ADGM is an international financial centre strategically located in the capital of the UAE. It is established by the UAE Federal Decree with three independent authorities – the Registration Authority (RA), the Financial Services Regulatory Authority (FSRA), and ADGM Courts -- together these ensure the provision of a world-class environment and infrastructure for investors.
The Financial Services Regulatory Authority (FSRA) is the regulatory body for financial entities operating within the ADGM financial free zone.
2. Dubai International Financial Center (DIFC)
DIFC is a special designated area in Dubai that operates under an independent regulatory and legal system as a financial free zone. As one of the world’s leading financial centres, DIFC aims to provide a secure and efficient platform enabling financial institutions and businesses to develop and expand in the region and beyond.
Forex brokers in DIFC are regulated by its own regulatory body Dubai Financial Services Authority (DFSA). It is the independent regulator of financial services conducted in, or from the DIFC.
Besides having the benefits of gaining access to the Middle East market and 0% taxation advantages, both Mainland and Free Zone Companies may assist the shareholders and employees to apply for the UAE residency permits.
If you don't intend to conduct forex trading in the UAE, or you already have a regulated foreign company, a representative office in any normal free zone would be more suitable.
Representative Office of a Foreign Forex Company
In some cases, foreign investors have already set up their companies and obtained the relevant licenses in other countries. However, they might be interested to expand their business in the UAE and the Middle East region. Instead of investing too much to establish a new UAE Licensed company, the investors can also opt to incorporate a representative office in any free zone, such as DMCC.
This options allows you to have Dubai presence but without applying for a specific Forex License!
The investor could use its representative office in Dubai for marketing purposes to promote its forex products and services and get connected with more customers from around the region.
Furthermore, this type of representative office is also able to provide some outsourcing services related to Forex, such as training in the Forex industry.
If you are trading with your own money, a DMCC FZ Company with specific membership is available as well.
Dubai Multi Commodities Center (DMCC)
DMCC is located in the heart of Dubai and recognized as the world’s premier free zone. It is the global commodities trading centre in the MENA region.
Regarding forex trading, there are 2 types of activities allowed in the DMCC.
a. Trading in FX, OTC and Exchange Traded Derivatives on its own behalf with counterparties deemed acceptable by DMCC: includes firms whose main activities are based on the trading of their own money in Forex or OTC and Exchange Traded Derivatives with counterparties which are regulated by authorities deemed acceptable by DMCC. Instead of a specific license, it is required that the firm obtain a membership of the Dubai Professional Trading Group.
b. Trading for a proprietary account on regulated exchanges: includes firms whose main activities are based on the trading of their own money in FX, OTC and Exchange Traded Derivatives on regulated exchanges. The firm is required to obtain the membership of Dubai Gold & Commodities Exchange (DGCX).
To sum up, the UAE provides foreign investors with various options for them to choose and decide the most suitable structure according to their needs. The zero percent corporate tax, an extended double tax treaties network, world-class infrastructure, and business-friendly environment have already attracted many famous forex companies to come here and establish their offices or headquarters.
Our Dubai team is equipped with professional specialists with knowledge of the UAE legal and regulation systems, enabling us to assist you to incorporate your proposed company and applying for the relevant licences and relieve you from the complicated preparation and application process.
now to initiate a further discussion on your needs.