The Securities and Exchange Commission (SEC) has proposed tougher rules for online forex and contracts for difference (CFD) trading in Nigeria, including capital requirements of up to N5 billion for some operators. The proposed SEC online forex trading rules are aimed at strengthening oversight, protecting investors and bringing both local and offshore platforms targeting Nigerian traders under regulatory control.
Under the proposed framework, forex brokers, introducing brokers, technology and platform providers, as well as offshore companies offering services to Nigerians, will be required to register with the SEC. Market-making brokers will need a minimum paid-up capital of N3 billion, while brokers operating under the straight-through processing (STP) or electronic communication network (ECN) models will require N2 billion. Technology and platform providers face the highest requirement of N5 billion, while individual and corporate introducing brokers will need N30 million and N150 million respectively.
The commission is also proposing stricter rules around clients’ money and trading risks. Brokers will be required to keep customers’ funds in separate accounts and reconcile them daily, while retail traders will benefit from negative balance protection, meaning they cannot lose more than the money in their trading accounts. Proposed leverage limits include 1:400 for major currency pairs and 1:300 for minor and exotic pairs, indices and commodities, while cryptocurrency products would be capped at 1:2. Professional clients could access leverage of up to 1:1000, subject to risk controls.
The proposed rules also target aggressive marketing practices that have become common in the online trading space. Forex operators would have to ensure their advertisements are clear, fair and not misleading, while profit claims must carry prominent risk warnings. The use of celebrities and social media influencers to promote forex services would require SEC approval, and unsolicited cold-calling of retail clients would be prohibited. Operators would also have to disclose the percentage of retail accounts that lose money and update the information monthly.
The SEC further warned that anyone offering or advertising online forex services to Nigerians without registration would be treated as an illegal operator. CFD brokers would have to submit daily price-spread reports, while technology providers would be expected to maintain at least 99.5 per cent uptime during trading hours and report major cybersecurity breaches or system failures within 24 hours. Existing operators would have three months after the rules take effect to apply for registration and six months to fully comply, signalling a major regulatory shift for Nigeria’s fast-growing online forex market.
source: The guardian
