By Dania Abdelfattah
RAMALLAH, West Bank (Raqeeb) — What Prompted the Palestinian Capital Market Authority to Shift Its Strategy Towards Forex Companies? This question reflects the significant transformation witnessed in the Palestinian financial market recently, following the Palestinian Capital Market Authority’s (PCMA) decision to license forex companies. The licensing regulations, issued after years of refraining from licensing, carry important economic and regulatory implications and raise questions about the motivations and potential effects on investors, particularly young people who constitute over 80% of traders in a global forex market valued at approximately $6 billion daily, with a local trading volume of $730,000 in the last three months.
Prior to this decision, the PCMA adopted a policy of abstaining from licensing forex companies, citing the high risks associated with this trade, such as fraud and unaccounted losses. However, during this period, the activity of unlicensed offices increased, leading to a rise in complaints about illegal practices, including fraud and misinformation. The Director General of the Securities Department at the PCMA, Mr. Murad Al-Jadba, noted that “abstaining from licensing was insufficient to protect investors, leaving these unlicensed offices to operate without oversight or regulation.”
Mr. Murad emphasized that the primary goal behind the decision is to enhance transparency and protect investors’ rights. He stated, “Licensing forex companies enables the Authority to monitor their performance and ensure compliance with laws, thereby reducing risks faced by investors.” He also highlighted the importance of technology in market surveillance, saying, “Adopting artificial intelligence and data analysis techniques helps us detect manipulation or illegal activity early, which reinforces market integrity.”
Expected Impacts on the Market and Investors
The PCMA has set stringent standards for licensing forex companies. Current trading trends in the Palestinian market include financial assets such as currencies, the Nasdaq Index, the Dow Jones Index, oil, and the euro pair. These standards require compliance with relevant Palestinian laws and adequate capital controls. Additionally, 59,000 contracts have been executed, with regulatory instructions issued for centralized data and transaction storage to enhance transparency and credibility. Only companies meeting these standards can obtain the necessary licenses, and three companies have been licensed to operate in the Palestinian market, ensuring the qualification of reputable firms. Investor protection has been guaranteed through close monitoring of all transactions and pricing.
The decision is expected to organize the local market, thereby enhancing investor rights and confidence in financial institutions. The number of investors currently stands at 470, and the licensing of forex companies will provide legal guarantees and better oversight for traders, reducing illegal practices and fostering investment awareness.
Experiences from other countries indicate that regulating the forex sector has led to significant reductions in fraud cases and increased safe investments. For example, Jordan began regulating the forex market earlier than Palestine, enabling licensed companies to operate before others. This allowed them to learn from the experiences of other nations to avoid chaos and fraud. Emerging economies that lacked effective data preservation systems demonstrated the disorder that can arise in this market. This underscores the importance of adopting effective regulatory systems to ensure success in the Palestinian market, highlighting the need for enhanced cooperation with international bodies to regulate digital operations.
“Al-Raqeeb” engaged with experts who confirmed that the decision represents a necessary step to organize the market and protect young people, a group constituting approximately 80% of forex traders in Palestine, primarily males aged 19 to 45. Experts noted that financial illiteracy makes this demographic more vulnerable to risks. Forex is perceived as an opportunity for quick profits but can lead to significant losses due to a lack of expertise and knowledge of market fluctuations. This is reflected in preliminary trading results from Sept. 1, 2024, to Nov. 30, 2024, where losses reached approximately $306,000, exceeding 55%.
Professor Fayrouz Darwish from Birzeit University emphasized the role of universities in spreading financial literacy, stating that “cooperation with the PCMA resulted in educational lectures aimed at protecting students from falling prey to unlicensed companies.” She also called for integrating financial literacy into academic curricula as part of a comprehensive strategy to educate future generations.
Experts believe the decision will provide greater legal protection for young investors by subjecting licensed companies to strict oversight. Furthermore, regulating the sector through the licensing of forex companies positively contributes to strengthening the Palestinian economy and confidence in the local market by stimulating e-commerce and creating new job opportunities in the fintech sector. Licensed companies may also attract some foreign investments seeking a legal and safe environment, thereby boosting confidence in the Palestinian financial market.
Through regulation and oversight, the Palestinian market will become more transparent and reliable, enhancing overall confidence. Thus, efforts must be made to strengthen cooperation with international bodies to regulate digital operations and organize the market in line with global standards.
Despite potential benefits, regulating the forex market faces significant challenges, including monitoring complex digital operations. Financial illiteracy remains a major obstacle. Dr. Raafat Al-Jallad, Dean of the Faculty of Business and Economics at An-Najah National University, stressed the importance of financial awareness among young people, particularly given the significant proportion engaged in forex trading without sufficient financial literacy. He called for intensified educational lectures in collaboration with universities to raise financial awareness, stating that “young people must possess sufficient financial knowledge before entering the forex market.” He also emphasized the importance of controlling behavior and remaining calm when making investment decisions to avoid losses caused by greed or fear.
Experts agree that licensing forex companies can be a step in the right direction if accompanied by continuous efforts to enhance financial awareness and ensure strict oversight. Al-Jadba affirmed that the development of the Palestinian market depends on a comprehensive partnership between the public and private sectors, saying, “Developing the market does not only involve technical and regulatory aspects but requires genuine partnership to achieve sustainable development.”
Will This Step Be Enough?
The critical question remains: Will this decision prove effective in protecting investors and enhancing integrity? The answer depends on the Authority’s commitment to continuously developing regulations and intensifying awareness efforts. Success also requires enhanced collaboration with universities and the private sector to ensure future generations learn how to invest safely.
Global Forex Market Highlights:
- Daily Trading Volume: $6 billion
- Number of Licensed Companies in Palestine: 3
- Trading Volume in 3 Months: $730,000
- Transaction Losses: $306,000
- Percentage of Losses from Deposits: 55%
- Number of Executed Contracts: 59,000
- Number of Investors: 470
- Trading Trends: Currencies, Nasdaq Index, Dow Jones Index, Oil, Euro Pair