Forex is the largest, and one of the most liquid markets in the world. That scope and size create several unique challenges, regulation being one of them. A few years ago, currency trading was like the black market, with virtually no laws, no rules, nothing. Traders and investors completely relied on the mercy of brokers and banks.
Those who are against laws and rules would prefer trading during those days. But unfortunately for them, or fortunately for others, those times are long gone. Today, governments and independent organizations have set up regulatory bodies that aim to regulate the trade and bring transparency and fairness to the market. The function of supervisory bodies is to regulate forex market by setting rules and standards which all brokerage companies under their jurisdiction must abide by. These standards and requirements include mandatory registration and licensing with the regulatory body, regular audits, compliance with market prices, transparency and more. They help to ensure that forex trading is fair and ethical for all parties involved.
Forex Regulation in Nigeria
If you are a Nigerian Citizen or live there, you may be wondering whether forex is legal in the country. The fact is forex trading is legal but poorly regulated. There’s no particular regulatory body formed by the government to regulate this volatile liquid. Recently, in 2018, the Securities and Exchange Commission (SEC) had a meeting with the Central Bank of Nigeria (CBN) to create a regulatory body that will be overseeing forex trading, which is increasingly getting popular in the country.
South Africa’s FSCA and the UK’s FCA are some of the regulators overseeing the leading brokerages operating in Nigeria, most of which are foreign. There are other many unregulated local brokers in Nigeria which make individuals and investors prone to bad practices and cams by the brokers. In case of FSCA and FCA UK regulated brokers, traders are protected by the strict rules and standards of these foreign regulatory bodies; but sometimes it’s a tedious process to settle disputes when they arise against the foreign brokers it involves a foreign regulator instead of a local one. This makes the need for local forex regulation in Nigeria very important. But before the government establishes a local regulator, Forex investors in the country are advised to work with foreign regulated brokers.
For a lucrative business like forex which can attract fraudsters and conmen, there should always be a regulatory body that will step in when the brokers break the law and don’t abide by the set standards.
Regulatory bodies also help build trust between brokerage companies and their clients, since most investors don’t have to scrutinize everything. Thus they depend on the regulators to help build that trust. Clients can deposit their money and trade with the peace of knowing their money is safe. With that said, let’s look at a few advantages of working with regulated brokers.
Advantages of Trading with Regulated Forex Brokers
1. Regulators Promote Fair and Ethical Behavior
In the past, when Forex was unregulated, there were many cases of hoodwinking in the trading. Every today, some people are still losing their money due to the greed of some brokers in the market.
Regulatory bodies have made it quite difficult for such things to happen by creating stringent measures and strict rules and guidelines that the participants have to abide by. However, there’ s still a possibility of theft and unethical practices as some brokers take advantage of jurisdictions like Nigeria that don’t have real oversight.
As an investor, you should be very careful to ensure that you’re not dealing with people ulterior motives as this can cost you a lot of your money. You can do this by choosing a broker who is regulated by a strict regulator and with a solid reputation.
2. Regulation Protects Clients
Another importance of forex regulatory bodies is to cushion clients. Their strict rules call for brokerages to have a layer of protection together with the clients they deal with. These protection strategies are updated on a regular basis in order to deal with new risks and challenges that keep on emerging in forex trading business.
As such, through proper regulation, your interests as an investor are safeguarded and your investment secured since you’ll be compensation in the event the broker becomes bankrupt.
3. Regulators Deal with Fraud and Solve Disputes Between Clients and Brokers
Establishment of a regulatory body in Nigerian will create a platform where graft cases in FX trading can be dealt with effectively.
In the last few years, many Nigerians have experienced Scams in form of Ponzi schemes, boiler room tactics and churning of customer accounts. A regulator has the mandate and power to deal with any party engaging in illegal practices by following the legal channels as stipulated by the law. The only problem here is that foreign regulators are only able to deal effectively with illegal and unethical cases occurring under their jurisdictions.
Nevertheless, the Forex market in Nigeria has seen a significant reduction of illegal practices thanks to the serious enforcement of the rules by foreign regulators.
4. Regulators Ensures Fund Segregation
Regulatory bodies ensure that your investment doesn’t go in the same account as your brokerage’s capital. This ensured that the broker can attend to your withdrawal request any time without delay.
5. Regulators Prevent ‘Free Money’ Tricks
Unregulated forex brokerage will often come up with tricks to lure unsuspecting investors. They do so by promising a free a bonus once you sign up for an account with them. This bonus is ideally not your money but your broker’s and you can’t withdraw it. They won’t even allow you to withdraw your deposit because it’s mixed with their capital. Regulators help to avoid such scams and ensure honest trading.
In Conclusion
Regulation is very important in everything that we do. Forex brokers have to abide by the guidelines and standards set by a regulator, and this prevents them from engaging in illegal and unethical practices. For this reason, all investors in Nigeria should choose regulated forex brokers Nigeria to safeguard their money and interests.
Join Daily Trust WhatsApp Community For Quick Access To News and Happenings Around You.
