How Trading CFDs for Malaysians, Who Never Hold an Account in the Bursa Malaya Exchange Works
One day, a friend asked why I needed to have a CDS account and a complete KLCI-brokerage account setup if I just want to gamble that Tesla is going up. He was baffled, because technically, I did not require either of these things just to take a bet. Trading CFDs means Malaysians can bet that the price of a stock, index, commodity or others go up or down, without actually owning it in the first place. 
No need for CDS registration, no physical settlements of share trades. Only a contract between you and your broker on the indices trading account set up price difference that arises in the stock (or any underlying market). This is Why You Do Not Want to Carry Around Loads of Paperwork Buying US stocks directly from Malaysia sometimes implies currency conversions, potentially custodian accounts, and other LHDN papers if one plans to trade stocks from Uncle Sam at high frequency. But with the advent of trading CFDs, all this unnecessary process simply got reduced considerably because you are technically not buying a part of the underlying company as a shareholder. What you are truly doing here is putting a prediction for an instrument on how far up or down the price goes and cashing out what you made eventually by selling the contracts you previously owned. To many Malaysians, it is surprisingly very intuitive once the whole CFDs concept sunk in. The Use of Leverage – A Double-Edged Sword This is where risks climb steep – fast. Many Malaysia brokers that offer CFDs give you the ability to trade high-value items for a modest cash deposit. This is called leveraged trading, which can offer massive payouts. Of course, the opposite is true too and the risks come with multiplied value should price movements go against your trades. For example, an individual trading RM 1,000 of margin in leveraged Nasdaq CFD has the capability of losing all his/her money within minutes if volatility kicks in against them. This scenario happens at a higher frequency than most can comprehend amongst active trading groups online. Profiting on Prices Decreasing: Shorting on CFDs has NeverBeen So Easy! Shorting stocks on Bursas Malaysia is generally complicated and not for private clients or even with difficulty. However, as the use of CFDs gained traction in the local trading circle, shorting is simply not as complicated anymore. Say a given Malaysian individual believes that Petronas Chemicals is over-valued, he or she could place the ‘Sell’ trade just like placing a ‘Buy’ trade on your existing CFDs account! It should come as no surprise, why people prefer using CFDs for short selling than trading the actual stocks in the local bourse. The tax issue which no Malaysian can explain it concisely. Since Malaysians who engage in trading CFDs is in an arbitrage of currency price and have not physically own a local trading account in any local stock exchange like Bursas Malaysia’s, the revenue derived from this form of investment falls in a legal grey area. Strictly speaking, gains from trading inCFDs are taxable in Malaysia as trading incomes, not capital gains because individual trades don’t always last long and this type of income is not recognized under the capital gains tax law of Malaysia. Nevertheless, individuals seeking to venture into this sort of investment should probably find an accountant or tax advisors if serious to avoid any tax penalties or complications with LHDN down the road.
No need for CDS registration, no physical settlements of share trades. Only a contract between you and your broker on the indices trading account set up price difference that arises in the stock (or any underlying market). This is Why You Do Not Want to Carry Around Loads of Paperwork Buying US stocks directly from Malaysia sometimes implies currency conversions, potentially custodian accounts, and other LHDN papers if one plans to trade stocks from Uncle Sam at high frequency. But with the advent of trading CFDs, all this unnecessary process simply got reduced considerably because you are technically not buying a part of the underlying company as a shareholder. What you are truly doing here is putting a prediction for an instrument on how far up or down the price goes and cashing out what you made eventually by selling the contracts you previously owned. To many Malaysians, it is surprisingly very intuitive once the whole CFDs concept sunk in. The Use of Leverage – A Double-Edged Sword This is where risks climb steep – fast. Many Malaysia brokers that offer CFDs give you the ability to trade high-value items for a modest cash deposit. This is called leveraged trading, which can offer massive payouts. Of course, the opposite is true too and the risks come with multiplied value should price movements go against your trades. For example, an individual trading RM 1,000 of margin in leveraged Nasdaq CFD has the capability of losing all his/her money within minutes if volatility kicks in against them. This scenario happens at a higher frequency than most can comprehend amongst active trading groups online. Profiting on Prices Decreasing: Shorting on CFDs has NeverBeen So Easy! Shorting stocks on Bursas Malaysia is generally complicated and not for private clients or even with difficulty. However, as the use of CFDs gained traction in the local trading circle, shorting is simply not as complicated anymore. Say a given Malaysian individual believes that Petronas Chemicals is over-valued, he or she could place the ‘Sell’ trade just like placing a ‘Buy’ trade on your existing CFDs account! It should come as no surprise, why people prefer using CFDs for short selling than trading the actual stocks in the local bourse. The tax issue which no Malaysian can explain it concisely. Since Malaysians who engage in trading CFDs is in an arbitrage of currency price and have not physically own a local trading account in any local stock exchange like Bursas Malaysia’s, the revenue derived from this form of investment falls in a legal grey area. Strictly speaking, gains from trading inCFDs are taxable in Malaysia as trading incomes, not capital gains because individual trades don’t always last long and this type of income is not recognized under the capital gains tax law of Malaysia. Nevertheless, individuals seeking to venture into this sort of investment should probably find an accountant or tax advisors if serious to avoid any tax penalties or complications with LHDN down the road.