In recent times, Forex trading is on the rise, especially in South Africa. The reason behind this is that the industry has developed a lot in the past few years, with a growing number of traders and brokers. With a well-regulated financial sector, the interest in forex trading amongst the investors is on the rise.
As you might be aware, the forex market is the largest and most liquid financial market in the world. While Africa was not in the picture before, the new European regulations have made it difficult for brokers to accept more traders and operate conveniently. So, they are looking for non-EU regulation authorities for registering their clients by obtaining a license. The regulatory bodies in South Africa are the ideal options for them. As a result, the numbers of forex broker in South Africa, as well as traders and investors, are increasing.
Trading options in Africa
Investors in Africa can use ISE currency derivatives to trade through CFDs. They can also participate in forex spot trading with regulated forex brokers.
The trading method of binary options is still not very popular in Africa, but it is slowly becoming one of the forex trading alternatives preferred by African traders and investors.
The African trading market does not lack features and technology and it is not restricted by any law or regulation. So, whether it is a trader, investor, or broker, there are not many places in the world that have more opportunities than here.
Reason for the rise of forex trading in Africa
If you are into forex trading, then you must know that the first thing you need for trading is a broker that provides you with trading platforms, trading tools, and trading accounts to trade safely. Now, for the past few years, many EU regulated brokers are coming to South Africa and opening their local offices here. It is helping in fulfilling the forex trading demand of investors and individuals in South Africa. But what could be the reason for brokers to choose South Africa? Let us find out.
Brokers leaving Europe
All of it started in 2018 when the European Securities Markets Authority (ESMA) introduced new regulations in the EU forex market. These regulations placed limits on leverage. 30:1 became the new maximum leverage. Moreover, binary options, promotions, and bonuses were banned. ESMA also guaranteed negative balance protection for clients.
These new regulations affected the profitability of the European forex industry a lot. It was the most profitable regional market throughout the world before, but now the forex brokers found it difficult to continue their business. Therefore, they started looking for less regulated markets overseas, so they could earn profits easily.
This is the reason forex brokers are so interested in the Nigerian market. This market lacks local regulation. Later in 2018, the Securities and Exchange Commission (SEC), which is the Nigerian financial regulator, admitted in a public notice that online retail forex trading is unregulated. However, although it is great for brokers, it also causes some risks for traders as they cannot differentiate a good broker from a scam. Compared to the SEC that has no regulation at all, FSCA is a better choice for both brokers and traders.
The Financial Sector Conduct Authority
The South African financial regulator is the Financial Sector Conduct Authority (FSCA). FSCA, unlike SEC, is very active in regulating the forex market. While the interest in forex trading is increasing, FSCA is stepping up against criminal forex brokers and planning a new licensing regime to all brokers.
This new licensing regime is known as the Over the Counter Derivative Provider (ODP) license. It forces all brokers in the country to provide the FSCA with constant access to all their transaction data. As a result, the regulator can access the instrument type, price, underlying asset, used leverage, name and residential nation of the investor and every other transaction details. This way, FSCA wants to ensure that all clients are treated fairly, and no broker can engage in any illegal activity.
The forex market in Africa is quite developed now, but it is not completely free from scams. So, if you are a trader, always make sure to choose a broker that is regulated by either FSCA or any other major international regulator.
The ODP licensing regime is in the application phase right now, but after it is activated, FSCA will be able to play a more active role in protecting the traders.
Right now, the rise of forex trading in Africa has come from the EU traders. However, Australia is also going to follow the footsteps of Europe about strict regulations soon, so, another wave of international brokers is expected in Africa that will prefer this more profitable market. If you want to get into the forex industry, then this is the right time.