Singapore is the third-most competitive financial center after New York City and London. While surprising for some, the ‘Lion City’ has made considerable economic strides in recent years. Hence, it is among the trending focal points of foreign exchange trading. Let’s explore this massive market globally and the opportunities available for those in Singapore.
Forex in The Global Market
Forex is the most traded and valuable financial instrument globally, with several trillions of dollars exchanged daily. It is a decentralized market with players ranging from large commercial banks to retail traders.
- Commercial banks: These entities (categorized under the ‘interbank market’) offer the highest volume of currencies. They handle clients’ foreign exchange transactions and trade speculatively with their dedicated trading desks.
- Central banks: These institutions participate in forex to influence open market operations and interest rate policies. They are also known for intentionally weakening or strengthening their domestic currencies to make them favorable to their nation’s foreign dealings.
- Multinational corporations: Large global companies need the forex market for their imports and exports. They often engage in back-dated transactions by hedging currency risk in anticipation of products being delivered later.
- Retail traders: Finally, some everyday traders participate in forex for speculative reasons. While a small sector of the entire market, this is rapidly growing in Singapore and globally.
While forex operates at countless hubs, it is concentrated in so-called financial hubs, specifically New York City, London, Tokyo, and Sydney. Besides the monetary value these regions bring, they also dictate the daily times of trading sessions in forex.
The Forex Trading Landscape in Singapore
It’s worth noting that the latest Global Financial Centers Index rankings put Singapore third among the top financial hubs. The nation surpasses Tokyo and Sydney in this regard. One reason is that the Singaporean dollar (Singapore’s currency) isn’t as widely used as the Japanese yen or Australian dollar.
Regardless, forex trading in Singapore thrives, making the country the premier destination in Asia.
While being a forex-friendly region, Singapore ensures compliance and security through regulation. The Monetary Authority of Singapore (MAS) is the country’s leading financial regulatory authority and central bank. This body fortifies the industry, addressing all the relevant aspects for fair and legal participation.
The growing number of forex brokers operating will be all too familiar with the MAS’ rigorous legal framework and compliance. However, one unique aspect of Singapore is its conducive business environment. The World Bank ranked it second in its latest Ease of Doing Business rankings, making it one of the go-to spots for brokers to set up shop nationwide.
Singapore is also attractive because it is a tax haven, greatly benefiting companies and investors. For example, the government generally considers secondary income in forex for the average person as non-taxable. The income is capital gains, which are not taxed in Singapore. Thus, traders can keep the entire value of their profits to themselves.
Forex Trading Opportunities in Singapore
Singaporeans have a plethora of avenues they can explore to capitalize on the forex wave.
- Self-directed trading: Here, traders, from scalpers to swing traders, can attempt to profit from currency movements through online trading platforms. An emerging opportunity in this sphere is the presence of prop trading. This is where forex traders participate in a funding program to trade multi-thousand-dollar accounts and share the profits with a firm.
- Copy trading: Instead of active trading, those in Singapore can invest in a copy trading account with the many regulated brokers in the country. This avenue allows users to copy the positions of experienced traders, capitalizing on their trades passively.
- Affiliate marketing: Speaking of brokers, people in Singapore can become affiliates or ‘introducing brokers.’ By referring other people or traders to the broker, they can earn attractive recurring commissions or once-off monetary rewards.
- Software development: Technology is always at the top of everyone’s mind when involved in forex. Those with a penchant for software development can shake up the industry with their inventions, whether a trading bot or a behavioral data analytics platform.
Developers should also consider the emergence of artificial technology, which is expected to revolutionize the trading world.
- White labeling: As stated earlier, Singapore boasts a favorable business environment. However, building a trading brokerage from scratch is laborious, complex, and expensive.
It is possible to find a white label arrangement with established brokers. In this arrangement, the company allows the would-be owner to use all its resources to operate a broker under its own name and branding.
White labeling is more common than many think, partly explaining the steady rise in forex brokers worldwide.
The Continued Growth of Forex in Singapore
Singapore’s position as an elite financial center contributes to forex growth locally and abroad. While the region encourages the practice of trading currencies, it is under proper regulation. However, compliant participants enjoy several perks, such as the ease of business and minimal or no tax. Consequently, Singaporeans can explore many opportunities in the space, such as copy trading, affiliate marketing, and white labeling.
