FSCA regulated Forex brokers
The Republic of South Africa has one of the most developed economies on the African continent and is the only state in this region to be a member of the G20 International Economic Cooperation Forum. The country has a mature financial system, largely controlled by the South African Reserve Bank. The latter is also responsible for issuing and controlling the South African Rand (ZAR).
The local economy is strongly influenced by the global economy due to the country’s heavy dependence on foreign trade. Rich in natural resources, South Africa is a leading exporter of precious and base metals, with its main trading partners being Japan, China, Germany and the United States.
Forex trading has become extremely popular with the locals in recent years, thanks in large part to the liberal economic environment in the country. South Africa has the largest forex market on this continent, with a daily trading volume of over US $ 19 billion in 2017 according to information released by the Bank for International Settlements.
By comparison, traders in the continent’s second largest market, Namibia, recorded a daily trading volume equivalent to one-tenth that of South Africa for the same period. The local ZAR is the 20th most traded currency globally and is expected to continue to improve in the future.
With the tightening of European regulatory frameworks and the reduction of debt ceilings, an increasing number of forex brokers are beginning to take an interest in the South African Forex market. The country has become an attractive destination for brokers looking to reduce their operational costs and expand their customer base.
Forex regulation in South Africa
Currency trading in South Africa is legal and is enjoying increasing popularity among residents. The foreign exchange market is overseen by the local regulatory authority, the Financial Services Conduct Authority (FSCA), whose main objectives are to protect market participants, ensure fair trading conditions and prevent illicit activities such as trading. money laundering.
Foreign brokerage firms must receive authorization from the FSCA before they can legally offer their services on South African soil. Brokers must cover the minimum capital requirements of the regulator and be headquartered in South Africa .
In addition to spot foreign exchange transactions, locals can also legally engage in over-the-counter transactions with derivatives. The sale of derivative products requires a special ODP (Over-the-Counter Derivative Provider) license from the FSCA.
Approved licensees can offer a wide range of derivative products, including currency, commodity, interest rate and equity derivatives. The offering of derivatives is regulated by the Financial Markets Law of 2012, which has been subject to several changes over the years.
The latest changes to the law were drafted in 2014 by the country’s finance minister, but came into effect several years later. PDOs must report all derivative transactions to an approved trading repository. Licensed companies are legally required to provide the local regulator with unfettered access to all transaction data.
This includes the type of derivatives, the underlying assets, prices, risk mitigation measures, etc. Suppliers are required to keep a diligent record of all derivative transactions that they have processed in the past five years, starting on the day of the end of transactions.
Brokers who deal with leveraged derivatives like Contract for Difference (CFDs) should carefully assess their clients before allowing them to trade such volatile products. South African investors also have the option of trading currency derivatives on the Johannesburg Stock Exchange.
Although South African residents are not prosecuted for trading on offshore websites, it is still recommended that you choose a broker with local FSCA clearance. If you insist on joining a licensed brokerage firm overseas, you should at least make sure that the firm of your choice is properly regulated by the laws of a recognized jurisdiction like Cyprus, for example.
Another thing worth considering is funding your trading account, which is much easier for those who join FSCA regulated brokers. Those who trade with foreign brokers are recommended to open offshore bank accounts.
It is easier to arrange payment by wire transfer than using a locally issued credit card, due to the complex laws that govern the transfer of cash to foreign institutions. It is also important to make sure that your broker, whether locally licensed or not, allows you to open an account whose base currency is ZAR. Otherwise, you will be charged for the conversion.
South African Financial Regulators
The South African financial industry uses the Twin Peaks regulatory model. It is governed by several entities, following the reorganization of the former regulator, the Financial Services Board (FSB). The FSB has been divided into two individual entities under the Financial Sector Regulation Act of August 2017. Each of them has different regulatory responsibilities.
The conduct of financial companies operating in the country is supervised and regulated by the Financial Sector Conduct Authority of South Africa (FSCA). It supervises and controls the entities that are authorized to provide financial products and services to the local population.
Examples include insurance companies, brokerage firms, and pension funds. The FSCA ensures that all these institutions operate in full compliance with the local regulatory framework. It has the power to issue and revoke licenses.
The dissolution of the FSB also gave birth to the South African Prudential Authority (PA). The main mandate of this entity is to regulate non-bank financial institutions, including market infrastructure, cooperative financial institutions and financial conglomerates.
Finally, there is the South African Reserve Bank (SARB), which began operations in March 1921, shortly after the entry into force of the Currency and Banking Act of August 1920. The main mandate of the SARB is to ensure and consolidate the stability of local financial markets.
It also oversees the local banking system, issues ZAR coins and notes, and manages the country’s gold and currency reserves. The PA is a legal entity that operates within the administration of the SARB