In July 2010, the Daily Finance website carried an interesting report on weird laws in many parts of the world. For instance, the law in Italy that imposes a $430 fine on unsuspecting tourists feeding pigeons in Bergamo or the Mexican law that prohibits a cyclist from lifting either foot off the pedals of the bicycle while riding. While it is entertaining to learn about the strange laws that many countries have, learning about forex laws may actually save you a good bit of money and trouble too, especially if you are trading in currencies.
Knowing your Forex Laws- The First Step in Forex Trading
Knowing about the various rules and regulations that cover forex trades is a critical first step for anyone who wants to trade in foreign currency. This is true irrespective of whether you want to carry out a one time exchange transaction or you aspire to become a forex trader. Without having a very clear idea of the limitations imposed by the law of your land over foreign currency exchange, you should not attempt to make even a single transaction of this kind.
Different Countries Have Different Laws
Another key point to remember is that different countries may have dramatically different laws regarding foreign currency exchange and trading. For a forex trader, it is not only important to know the laws that govern such activities in his country. It is also in his best interests to have a bare bones idea of the laws governing the foreign currencies he deals with. This gives him a better view of the market dynamics that will influence the currency pair as well as allow him to factor in the limitations that such laws impose.
To quote a good example of differential forex laws, the U.K., which is a part of the European Union does not impose any barriers on moving currency within the Union. However, if you are moving money out to another country that does not follow the European law that is followed here, then local regulations in that country also need to be factored in. Another interesting aspect with the U.K. is that while you can repatriate or take out money from the country, you will need to make a declaration of foreign currency imports to the customs authorities.
A Key Aspect to Note when Online Forex Trading
Understanding the fact that forex laws may vary significantly from country to country is also a very critical thing to know if you are considering online forex trading. Beginners may assume that if a trade is ‘allowed’ or made possible by their online trading website, it is automatically legal. However, this is definitely not so. Trading websites typically have disclaimers stating clearly that it is up to the user/ trader to verify legality of the trade, method of trading etc. The site does not take the responsibility for the trader’s actions.
In fact, reputed online forex trading sites have traders submit an agreement that they fully understand the terms and conditions of online trading and they take responsibility for ensuring that their trades are acceptable within the purview of law.
Lily is an expert with Fxtrading.co.uk. She has studied Finance and is particularly interested in writing articles about real estate, foreign exchange and FX news.
