The Zimbabwe Stock Exchange (ZSE) has said it is working on the framework of Contract for Difference (CFD) to govern the trading of foreign currency on the Victoria Falls Stock Exchange (VFEX).
A CFD is a financial contract that pays the differences in the settlement price between the opening and closing trades. CFDs essentially allow investors to trade the direction of securities over the very short term and are especially popular in forex and commodities products.
In recent years, forex trading has grown in popularity across the African continent, which has become an exciting new hub of trading markets for both international forex brokers as well as African traders seeking to find new ways to earn income.
However, ZSE chief executive Justin Bgoni said forex trading in Zimbabwe had been like a jungle market system with people losing their hard-earned money to unscrupulous foreign brokers.
“We will shortly be launching a platform to allow safe and secure CFDs or forex trading in Zimbabwe on VFEX,” he said in an interview.
He added that VFEX was always exploring initiatives that can deepen the capital markets and add value to investors. Mr Bgoni said research on CFDs was conducted in consultation with various stakeholders familiar with this type of product.
He said that forex trading had become more popular in Zimbabwe, but unfortunately had been hijacked by unscrupulous brokers who have duped people of their money.
The Reserve Bank of Zimbabwe (RBZ) has often issued warnings to the public against participating and investing in Ponzi and Pyramid schemes, which largely emanated from unregulated forex trading.
According to the RBZ, Ponzi and Pyramid schemes tempt people into investing their money in lucrative investments and contribution systems with the promise of high returns.
Further, it said a Ponzi scheme attracted investors to invest money with a scheme operator in the belief that they had a genuine market to invest in, making them wait forever for the promised return on capital plus initial investment.
However, Mr Bgoni said ZSE’s intended to provide a regulated platform with registered and certified brokers that allows for safe and secure CFDs in Zimbabwe on VFEX.
VFEX is a subsidiary of the ZSE, launched in 2020 as part of efforts to attract global capital, while also helping restore foreign investor confidence in Zimbabwe’s capital markets and help companies raise capital in foreign currency.
It is believed the foreign exchange market is the largest financial market in the whole world. While the value of stocks traded on a single day may reach US$200 billion globally, the value of forex traded daily can exceed US$5 trillion. – Herald