Forex trading is extremely popular around the world. Due to its emerging financial importance, it has also caught eye of Pakistani traders. World forex trading industry generates a turnover of estimated US$6 trillion per day. Forex trading in Pakistan is flourishing with the advancement of 3G and 4G internet, people from local areas can earn through forex trading.
Regulatory Environment
Despite the actual fact that there are some brokers in Pakistan that can work without additional regulations, the regulatory system within the country continues to be quite strong, so you will have access to several different regulated and safe platforms that operate actively within the country.
Different institutions regulate top Forex brokers in Pakistan, the administrative units for forex in Pakistan are State Bank of Pakistan, SBP, and the Securities and Exchange Commission of Pakistan (SECP).
Securities and Exchange Commission of Pakistan
Securities and Exchange Commission of Pakistan (SECP) formed in 1997. The Securities and Exchange Commission of Pakistan mainly issues licenses to all or any investment companies, therefore the proven fact that brokers can function without regulations does not mean that there are not many registered Forex brokers in Pakistan and allows the authorized brokers to produce a maximum of 1:10 leverage for Forex trading. Pakistani Traders living abroad are not tied to the above regulation. Although SECP have a wide spread after its creation but still there are loopholes present for the regulation of forex traders. It has not included forex brokers and CFD brokers in Pakistan. There are not much regulation that you will find out related to forex brokers. However, you will find out regulation for foreign exchangers.
The main regulations that SECP imposes on forex trading are within the form of broker regulations under the Securities Act, 2015. Although, new rules for brokers are currently developed and will potentially make changes to the market. This may differentiate between three types of brokers:
- Trading and clearing broker (T&C).
- Trading and self-clearing (TSC).
- Trading only (TO).
This is done in order to give an opportunity for smaller brokers to satisfy all the desired compliance and regulatory frameworks, therefore encouraging foreign brokers to register under SECP.
SBP
SBP is responsible for the banking sector. It includes Banks, Islamic banking Institutions, Microfinance Banks, Exchange Companies, and many more. It also includes a specially defined Exchange Policy Department and it is only answerable for regulating the exchange system of Pakistan.
Despite all the regulations, international brokers can still work in Pakistan. This is often the largest reason for creating an uncertain marketplace for forex traders. That’s why, it’s highly recommended to decide on a forex broker with quite 10 years of experience within the Forex industry and regulation not only in Pakistan but also in other jurisdictions like Switzerland, UK, or Australia that are considered to be safe.
Regulations are persistently checked out as something, which will be potentially dangerous for a selected field, but in reality, regulations can help traders a lot. Due to the very fact that the Forex field is very risky, adding more risks to it does not really make sense. So, be sure to search for those who offer the most safety, since your funds can be a subject of some danger.
Legal and Illegal
“Is Forex trading legal in Pakistan?” is one of all the most often asked questions by Pakistani traders. Moreover, the answer is yes. Forex trading is legal and halal in Pakistan. Here are some cases in which trading forex is legal and illegal in Pakistan.
What is legal?
- It is linked with the real currencies that are managed by the correct managing authority.
- Your selected currency pair should contain two of these currencies AUD, CAD, CHF, EUR, GBP, HKD, JPY, NZD, PLN, SGD or USD. You can transfer the fund through a channel and convert them in your local currency.
- You must be sure of your tax liabilities.
- You must follow the SECP, SBP and State Bank of Pakistan’s rules and regulations.
What is Illegal?
When it comes to what is legal things get somehow complex for the peoples who are newbie to this field and get in the hands of scammers easily. Scammers show them dreams of earning big in short duration of time with less investment through illegal trading but in the end, they get caught and all of their investment is lost. Here are some of the things that are illegal in forex trading perspective.
- Trading of virtual currencies also knows as crypto currencies (such as Bitcoin, Litecoin, Pakcoin, OneCoin, DasCoin, Pay Diamond etc.) strictly banned in Pakistan. You will end up in jail if you get caught exchanging them for local currency.
- Trading of tokens is also illegal in Pakistan.
- Storing big value of foreign currency and not declaring them as taxable assets is also illegal in Pakistan.
- You are trading forex with foreign currency and you are not a tax filer. This is also illegal in Pakistan.
Petition against restriction of trading crypto currency trading is also in process in Sindh High Court.
How to open an account in Pakistan
Documents and information required
Opening a forex trading account in Pakistan is not too much tough. As most of the brokers are working as a subsidiaries of international brokers so you do not have to tensed about the documents required. The documents are termed as KYC (know your customer) documents. The documents vary from broker to broker that you choose. Some require and some not. Here are some of key information that is required by most of the brokers for opening an account.
- Complete Name
- Residential Address
- Personal Email
- Phone number
- Date of birth to confirm that you are above 18 years (NIC can be asked for confirmation)
- Country of citizenship
- Social Security Number or Tax ID (to make sure you are a tax filer)
- Employment status
Here is some of the information that is less required.
- Annual Income
- Net worth
- Trading experience
- Trading objectives
Steps to Open Account
Here are the steps in details you should have to follow or you must kept in mind to open a forex trading account.
- Choose of trusted broker comes at the first priority. You must select a trustworthy and reliable broker with good market image to open a trading account.
- Provide the information asked by your broker in the relative fields. That is typical personal information like name, address, contact, birthdate to make sure that you are above 18 years old.
- Reads the term and conditions of your broker carefully, and accept them.
- Provide the KYC documents asked by your broker. KYC (know your customer) documents are needed to verify your identity.
After uploading your documents, your sign up request is complete. Your broker will review your documents and will let you know that your application approved or not. When you have created your account. Your broker will send email to you containing the details of your account.
Important things to trade forex in Pakistan
Foreign Exchange brokers are now proposing Islamic Forex trading accounts to Pakistan traders.
Islamic Account
An Islamic Forex account (also referred to as swap-free accounts) is a halal trading account that proposed to clients who wants to take the position within the Islamic stock exchange in keeping with the principles of Islamic finance.
These forex accounts differ in many ways from regular Forex accounts and are provided to traders who want to do halal Forex trading without having to separate their investment activity from their religious principles. For a broker to declare that the accounts they are providing are according to the Islamic principle, accounts must satisfy a minimum of the subsequent conditions:
- Immediate execution of trades.
- Immediate settlement of the transaction.
- No interest owed on trades.
- Prohibition of gambling.
- Distribution of risks and benefits.
These accounts adjust to Islamic conditions and are offered exclusively to Muslim traders. These are distinct Forex trading accounts that:
- Do not charge any interest.
- Comply with Islamic principles.
PKR Withdrawals
Many brokers the same fund transfer option for deposit and withdrawals. It totally depends upon your broker that you have account. Here is a channel example that you can follow for withdrawals.
Trading Account —-> FX broker —-> Skrill —-> Payoneer —-> Local Bank Account
There is also consulting company name as digitech that removes this effort and help you to withdraw your funds and transfer them to your bank account straight away from your trading account.
Tax Filer
You are starting Forex trading in Pakistan and you do not want to get in any problem. You must make sure first that you are a tax filer. You have not done that then most of the brokers will not allow you even register account with them.