United Arab Emirates: Why are Retail Brokers Flocking to the UAE?

The United Arab Emirates (UAE) has been opening up to the world of western and global finance over recent years. Although this Middle Eastern country may seem inconspicuous in terms of land area and population, it has one of the highest gross domestic product (GDP) ratios; both in total and per capita.

With the emergence of free economic zones and independent financial centers in the UAE, global finance has been given a vital gateway to the eastern world and previously unexplored markets. It includes brokers and trading platforms from the retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term (FX) and contracts for difference (CFD) industries, so keen to seek regulation at the eastern end of the Arabian Peninsula.

United Arab Emirates Attracting Brokers From Around the World

The regulatory situation of the derivatives trading market in the United Arab Emirates is not clear-cut, and several licensing bodies stand out on the ground. The primary national entity is the UAE Securities and Commodities Authority (SCA). The institution was established in 2000 and answers directly to the Minister of Economic Affairs. Administratively and financially, it remains independent.

However, the UAE as a whole is divided into seven emirates, with independent institutions regulating financial market rules. The most popular destinations for brokers are Dubai and Abu Dhabi.

There is a special economic zone called the Dubai International Financial Centre (DIFC) in the first one. It is independent of the federal law imposed by the SCA and is governed by the Dubai Financial Services Authority (DFSA), established in 2004.

Another financial center and free economic zone within the country is the UAE capital, Abu Dhabi. Officially known as Abu Dhabi Global Market (ADGM), The ADGM was established in 2013 and acts as both a financial services regulator, a registration office and a local court to adjudicate investment industry-related cases.

While Middle Eastern countries can be a difficult market for Western companies to do business in, due to cultural differences and religious laws, the DIFC and ADGM economic zones have for years attracted many FX and CFD brokers looking for new markets for their services and new clients.

In the last two years, the ADGM license was granted to AvaTrader and Exinity, among others. Amana Capital, HYCM, HotForex, Pepperstone and many others operate under the supervision of the DFSA.

It is also worth noting that ADGM in 2018 introduced regulations governing the market for digital assets, thus becoming an attractive location for companies related to cryptocurrencies and blockchain.

Additionally, this year's news reveals that the entire country is gearing up for federal licensing of virtual asset service providers (VASPs for short) under SCA decrees.

“UAE has joined the group of top financial hubs globally and was ranked the most attractive financial center in the MENA region. The Middle East also seems to have a very positive future regarding fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term, which supports our business goal to provide the highest quality solutions and technological support for our customers.

“UAE is a fast-growing and highly adaptable country that provides and regulates all what is necessary not only for fair competition among FX/CFDs companies. It also provides a priority for unique and outstanding services for a client-oriented mechanism, in which investors get to have a mix of outstanding experience and absolute trust guided by the regulations and tools that the UAE applies,” Achraf Drid, Managing Director of XTB MENA, commented.

UAE Traders Among Top Spenders in FX Trading Market

Retail brokers and cryptocurrency platforms are shifting eagerly towards the Middle East not only because of its vast population (over 400 million people inhabit this part of the world), but also because of preferential licensing conditions, or a lower market saturation than in Europe.

The 'depth of portfolios' is also essential. Historical data analyzed by Finance Magnates in 2020 clearly showed that traders from this part of the world regularly make the largest deposits into their trading accounts.

In August 2020, it was an average of $16,000 (in comparison, investors from Switzerland deposited around $7,000 at the same time), and in September of the same year, it was almost $15,000. This was also confirmed by data published at the beginning of last year. Traders from the United Arab Emirates were sending on average $15,045 to their forex accounts.

But, how do the conditions look now? The latest data from cPattern clearly shows that trend remains unbiased. In 2021, the average monthly deposit stood at $12,685, while the average single deposit made by traders in this part of the world was $2,000.

Moreover, UAE retail traders were withdrawing a lot of funds: the monthly average for 2021 was $7,572. However, this is still significantly less than the average deposit value.

The value of the first deposit (FTD) realized by new clients is an extremely important indicator from a brokerage firm's point of view. In the UAE, throughout 2021, the indicator reached an average value of $2.2295, which is well above competing jurisdictions.

For example, in Singapore, which also boasts very high deposits and is considered one of the new financial hubs of the world, the FTD value last year ranked at $1,744. In Australia, by contrast, it was just over $1,000.