SEC Proposes New Rules for Online Forex Trading, Sets Capital Requirement – businesspost.ng

Secures Commission Establishes Minimum Capital Standards for Online Forex and CFD Operations

The Securities and Exchange Commission (SEC) has unveiled a comprehensive regulatory framework for online forex trading and Contracts for Difference (CFDs), establishing a minimum capital requirement of up to N5 billion for operators entering Nigeria’s retail forex market.

Issued on Tuesday, September 1, these provisions align with the Investments and Securities Act (ISA) No. 2, 2025, previously signed into law by President Bola Tinubu in March 2025. This initiative aims to integrate both domestic and offshore operators targeting Nigerian residents within a formal licensing system.

The draft regulations propose a tiered licensing structure featuring three distinct categories: Online Forex Broker/Broker Dealer, Introducing Broker, and Technology/Platform Provider, each accompanied by specific capital thresholds.

For B-Book or market-making forex brokers, the proposed minimum paid-up capital stands at N3 billion, alongside a minimum liquid capital of N2.4 billion—or ten percent of total liabilities, whichever is higher.

Brokers utilizing Straight-Through-Processing (STP) or Electronic Communication Networks (ECNs), including A-Book models, would need to post N2 billion in paid-up capital with a corresponding liquid capital requirement of N1.6 billion or ten percent of total liabilities, whichever is greater.

Technology and platform providers face the most stringent barrier, requiring a minimum capital of N5 billion—the highest tier among the listed categories.

Specifically, Corporate Introducing Brokers are subject to a capital requirement of N150 million, whereas individual introducers must meet N30 million. Additionally, registration fees range from N1 million for individuals to N30 million for technology providers, placed above base application and processing charges.

Furthermore, the rules mandate that at least 30 per cent of a registered entity’s paid-up share capital be held directly and continuously by Nigerian citizen directors. A minimum of two directors—including the Managing Director or Chief Executive Officer—must reside in Nigeria. The regulation explicitly prohibits routing this oversight through nominee services, trusts, or similar structures.

To ensure transparency and stability, a daily price spread report must be submitted by CFD brokers by 10:00 a.m. West African Time (T+1) the following business day. All regulated entities will collectively establish an Investor Protection Fund complying with the ISA 2025 guidelines.

Client funds are required to be maintained in segregated accounts at banks permitted by the Central Bank of Nigeria (CBN) and retained for a minimum of seven years.

Additionally, retail leverage is capped at 1:400 for major pairs, 1:300 for exotics and indices, and 1:2 for commodities; professional clients may access up to 1:1,000 based on eligibility.

The framework imposes strict restrictions, barring the promotion of trading involving the Naira without prior SEC clearance. Operators must also disclose monthly the proportion of retail accounts that experience losses and secure SEC approval for all advertising and influencer-driven campaigns.

Source link