Are CFDs regulated and legal in Singapore?
CFDs are popular instruments, but they come with a high risk due to leverage. 81% of retail investor accounts lose money when trading CFDs because of this fact. Before you start investing in CFDs you must consider whether you thoroughly understand how CFDs work and can afford to take the high risk of losing your money.
Singapore’s regulator, the Monetary Authority of Singapore, has been progressively tightening its regulations surrounding financial products offered to investors in recent years. It has included introducing more stringent requirements for the marketing and sale of investment products and increasing the minimum investment amount for certain products such as CFDs.
Despite this, CFDs remain popular instruments among traders in Singapore due to their flexibility and potential for high returns. Always remain aware of the risks involved in trading CFDs and ensure that you only deal with a reputable licensed broker.
What are CFDs?
CFDs (Contracts for Difference) are derivative products that allow you to speculate on the price movement of an underlying asset without actually owning the asset itself.
Some of the most popular assets traded as CFDs include shares, indices, commodities, currencies, and crypto.
You trade CFDs on margin, which means that you only need to put down a small deposit to open a position. It gives you much greater exposure to the market than if you were to trade the underlying asset directly. However, it also means that your potential losses can be much greater than your initial deposit.
How are CFDs regulated in Singapore?
In Singapore, the regulation of CFDs falls under the Monetary Authority of Singapore (MAS). The MAS is the central bank of Singapore and is responsible for ensuring the financial system’s stability.
IN RECENT YEARS, the MAS has been progressively tightening its regulations surrounding investment products offered to investors. It has included introducing more stringent requirements for the marketing and sale of investment products and increasing the minimum investment amount for certain products such as CFDs.
Despite this, CFDs remain popular instruments among traders in Singapore due to their flexibility and potential for high returns.
The key risks of trading CFDs include
Here are some of the key risks of trading CFDs.
Leverage and market risk
You effectively borrow money from your broker to finance your trade when you trade on margin. Your potential losses can be much greater than your initial deposit. The prices of CFDs are based on the prices of the underlying assets. It means that they can be volatile and subject to sudden changes.
When you trade CFDs, you enter into a contract with your broker. It means that there is a risk that your broker may not be able to meet its obligations under the contract.
How to choose a CFD broker in Singapore
Choosing a reputable and licensed broker is crucial if you’re thinking about trading CFDs. Here are some things to look for when choosing a broker:
A license from the MAS
The MAS is the financial regulator in Singapore and requires brokers offering CFDs to hold a capital markets services license. You can check if a broker has this license by searching the MAS Register of Financial Institutions.
Selection of underlying assets and competitive spreads
When choosing a broker, make sure that they offer a wide selection of underlying assets that you’re interested in trading. Spreads are the difference between an asset’s buy and sell price and will eat into your profits if they are too high. Consider comparing the spreads offered by different brokers before deciding on one.
So, are CFDs regulated and legal in Singapore?
Yes, CFDs are regulated by the Monetary Authority of Singapore (MAS). However, it is vital to be aware of the risks involved in trading CFDs and ensure that you are dealing with a reputable and licensed broker; learn more through https://www.home.saxo/en-sg/products/cfds.