Forex Trading in Zimbabwe – Overview
The Forex market is by far the largest market in the world and it is arguably considered to be one of the most vital vehicles of international commerce.
With the past and current economic upheavals in Zimbabwe, traders should not be discouraged as Zimbabwean traders are the link between local and international communities.
During the 1980s, the Zimbabwean currency went through a significant amount of demonetizing phases which led to its final suspension by the Zimbabwean government in 2009.
In its place, a multiple currency framework was put in place which allowed for certain currencies to be accepted in which purchase and trading within the country could commence.
These currencies include the US Dollar, South African Rand, Indian Rupee, Japanese Yen, Euro, British Sterling Pound, the Chinese Yuan, Botswana Pula, and the Australian Dollar.
Due to the severe and fluctuating currency values which are greatly affected by economic factors, which have in turn led to hyperinflations which devaluated the Zimbabwean currency several times, the currency became significantly weaker against other currencies.
Since the temporary suspension of the Zimbabwean Dollar and other currencies that are accepted instead, traders can check the value of the particular money that they have on hand and weighing its exchange rate with the US Dollar.
Forex Trading in Zimbabwe is possible, but is it legal?
Trading itself can be risky business and where there is great opportunity for profit, there is a chance of great losses and the last thing that a Zimbabwean trader will want to face is a run-in with the law.
Trading in Zimbabwe is legal as indicated in the Securities Act – Act 17/2004, but since its draft in 2004, it makes truly little mention of Forex Trading.
The Act outlines particulars that pertain to the Zimbabwean Capital Market and Intermediaries, with more information pertaining to the Zimbabwe Stock Exchange and the Financial Securities Exchange.
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Through the Act, the Securities and Exchange Commission of Zimbabwe (SECZ) can make rules to meet the objectives set out in the act along with enforcing the with the necessary levies and fees.
The Capital Market
The Securities and Exchange Commission (SECZ) is the Apex Regulator and therefore, the Capital Market is subjected to the oversight of SECA in ensuring the protection of investors when and as they trade in listed securities.
The market’s aim is to raise long term capital as this is essential in fuelling all the productive sectors of the Zimbabwean economy. The purpose of the market is to bring together investors with excess funds along with companies in the pursuit for long term capital.
Intermediaries
The intermediary base of the Capital Market is supported by entities such as Security Dealers, Custodians, Transfer Secretaries and several more, with the list of names of the intermediaries on the SECZ website for further consultation.
Zimbabwe Stock Exchange (ZSE)
The ZSE has a history as the backbone of the Zimbabwean Capital Market which can be dated back as far as the late 1800s. The manual trading system was replaced by an automated system in 2015 with the exception of only catering for stockbrokers.
The ZSE consists of two main indices namely the mining and the industrial index.
Financial Securities Exchange (FINSEC)
FINSEC received its first Alternative Trading Platform (ATP) licence in 2016 with the purpose of providing an electronic platform with the ability to formalising marginalised market segments in addition with combining all alternative trading activities on one marketplace.
In addition to facilitating electronic trading which spans over a wide variety of securities and by enhancing financial inclusion, it enables various investors in obtaining access to alternative capital market investment options that traditional exchanges do not offer.
Legal Forex Trading vs Illegal trade in currencies
The Security Act not only serves the purpose of protecting traders, but it provides a legal framework for the legal trading in Forex trading, amidst other financial instruments, given that it is done through a reputable broker that is licensed, authorized, and regulated.
The provision is made for the trading of Forex on an online platform and differs greatly from the less legal option of trading currency on the Zimbabwean streets which is an unregulated, illegal, and exploitive manner in which to conduct trading.
How can Zimbabwean traders trade Forex legally?
The very basis of trading is to ensure that it is done though a regulated and reputable Forex broker to ensure that the trader’s funds remain safe and that funds are only used by the broker to facilitate trading activities.
There is a vast amount of Forex brokers that accommodate, welcome, and accept Forex traders from Zimbabwe and despite the fluctuations of the Zimbabwean currency and it stands much weaker against other currencies, Zimbabwean traders can still trade using it.
Brokers offer tools that traders can use to open positions that are larger than their initial capital investment. By using leverage, Zimbabwean traders can enter into positions and trade their currency against that of others such as the ZAR, USD, GBP, and several others.
When looking for a broker through which to trade, Zimbabwean traders need to ensure that the broker not only caters for their specific trading needs, but most importantly, the broker is regulated and authorized by entities such as FCA, ASIC, FSC, CySEC, and several others.
Some of the best Forex brokers that Zimbabwean traders can look at utilizing to conduct trading activities within a legal manner include, but is not limited to:
Final Thoughts
Forex Trading is legal in Zimbabwe through the legal framework, which is provided, and which strictly oversees trading activities of all kinds. Forex Trading is only legal if it is done by using a regulated broker.
Forex Traders in Zimbabwe need to ensure that they select a reputable and well-regulated broker that is authorized and regulated by a reputable regulating entity such as the FCA and ASIC, amidst others.
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