Rwanda’s Capital Market Authority (CMA) has introduced regulations to govern online forex trading, marking the first time such trading activities have been formally regulated in the country.
The regulations, published on February 26, 2024, in the Official Gazette of February 27, outline the framework governing leveraged foreign exchange trading in Rwanda.
These regulations align with the authority’s dual mandate of facilitating market development while prioritizing investor protection within the Rwandan capital market industry – according to a public notice released by the CMA on March 1, 2024.
Leveraged foreign exchange trading involves internet-based trading activities conducted Over the Counter (OTC), enabling traders to speculate on the price movements of currency pairs by depositing a fraction of the full trade value to open a position.
This trading mechanism allows traders to potentially amplify both returns and losses, making it crucial for regulatory oversight to ensure fair practices and mitigate risks.
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One of the key provisions in the newly introduced regulations is the establishment of a maximum leverage ratio of 100:1 in leveraged foreign exchange trading.
This means that traders can control positions valued up to 100 times their initial investment, magnifying both profit potential and risk exposure.
The regulatory framework would be able to strike a balance between fostering market innovation and safeguarding investor interests.
CMA Rwanda seeks to create a conducive environment for responsible trading practices while promoting transparency and accountability within the industry.
Stakeholders in the sector are now urged to further developments and initiatives aimed at promoting market integrity, innovation, and sustainable growth within Rwanda’s capital market landscape.
