Understanding Money Broking

Money broking is referred to as the business of arranging transactions between buyers and sellers in money with brokers acting as an intermediary in consideration of brokerage fees paid or to be paid, but does not include the buying or selling of foreign currencies by the broker as a principal in such markets.

A broker is a person or firm which acts as an intermediary between an investor and a securities exchange. As securities exchanges only accept orders from individuals or firms who are members of that exchange, individual traders and investors require the services of exchange members. Brokers offer that service and are compensated in several ways, either via commissions, fees or through being paid by the exchange itself.

Permissible Activities for Money Broking Businesses

  • Bring together the counterparties on mutually accepted terms for the equivalent monetary products in terms of money or outside trade market to support the decision of an exchange
  • Receive payments for its administration as financier or commission fees
  • Should act as a mediator or intermediary only, and not allowed to act as a head or initiator

Labuan Money Broking License

It is easy to begin or expand your own money broking or forex business in Asia Pacific with the Labuan jurisdiction that provides 100% foreign ownership and low tax.

The money broking business is defined as the business of arranging transactions between buyers and sellers in the money or foreign exchange markets with brokers acting as an intermediary earning brokerage fees or commission. Labuan Forex Money Broking license, however, does not include the buying or selling of Malaysian Ringgit and foreign currencies by the broker as principal in such markets.

Applicants Requirements :-

  • Individual or institution with money broking expertise with a good track record and sufficient years of experience in the industry
  • Regulated money broker or provider of such services from other jurisdictions with approval from home authority with the letter of consent
  • Any licensed institutions including approved money broker under the Financial Services Act 2013 with approval from the Central Bank of Malaysia

Qualifying Eligibility for A Labuan Money Broker License

  • All applicants must show at least three (3) years of good track record and relevant experience in the money broking business
  • Applicants will be required to register a Labuan entity in order to operate the Labuan licensed money broking company with a paid-up capital of MYR 500,000

Regulatory and Operational Requirements for A Labuan Forex Money Broking License

  • Minimum paid up capital of MYR 500,000 (or equivalent) unimpaired by losses with a certificate of evidence from the banks within Malaysia and Labuan.
  • Must maintain an operational office in Labuan and all transactions must be done to, through and from Labuan.
  • Transact in foreign currencies of your choice, including Malaysian Ringgit.
  • Transactions are permitted with Malaysian residents, including authorized dealers approved by the Malaysian Exchange Control.
  • The money broking company shall impose a maximum leverage limit of 100:1 on clients’ trading transactions (i.e. a minimum of 1% margin deposit to enable the opening of trade position). Case in point, if the transaction is USD 100,000, then the margin requirement is USD 1,000.
  • Ensure the counterparties i.e. principal broker or liquidity provider are regulated by a recognised supervisory or authority.
  • It is necessary to obtain approvals from the authorities who intend to function prior commencing the business in those respective markets and such approvals have to be copied to Labuan FSA.
  • Where technology client interface is deployed, any intrusions or malfunctions of the systems incidents discovered must be reported to Labuan FSA with root cause and impact analysis report to be submitted within 14 days.
  • Labuan money broker must disclose to their clients the list of introducing brokers and their roles and responsibility.
  • The company must appoint an approved external auditor to execute an audit of business operations annually.
  • Maintain a separate account for clients’ money and marked clearly each client’s money in record and client’s withdrawal must be done within 3 working days.
  • All written agreements and contracts with clients and any party are needed to be documented.
  • The money broking company must have a principal broker, liquidity provider, trading platform provider and copies of agreements.
  • Mandatory to observe and comply with the AML/CFT Act and Guidelines issued by Central Bank of Malaysia and Labuan Authority via the provision of a compliance officer.
  • Changes on shareholders, directors, office location, additional office outside Labuan and outsourcing arrangements require prior approval from Labuan FSA.
  • Yearly license fee payable to Labuan FSA is USD 1,500.

In case you are also looking to start your Money Broking Business, do reach out to our QX Trust team as we have been assisting clients in various financial business licenses for close to 10 years. We provide holistic and comprehensive advisory which covers all necessary requirements including tax and compliance matters. Our team will guide you thoroughly from arranging the required documents for obtaining the license approval. Connect with us at +60 3 9212 6940 or consultant@qx-trust.com for a free consultation today.