Home Mzansi News Insights into the South African Forex Regulation

Insights into the South African Forex Regulation

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forex trading in South Africa
Source: https://globalarbitrationnews.com/protection-of-foreign-investments-in-south-africa/

As the most advanced economy in the African continent, South Africa is a country where interest in Forex trading continues to be elevated. This is a G20 member state and because of that, numerous improvements in terms of financial regulation have been made along the way. 

The local currency – South African Rand, is heavily traded by traders all around the world, especially now when events like the COVID-19 pandemic, inflation, or the recent political uncertainty created by the jailing of former president Jacob Zuma. However, it is important to know more insights into the local regulation, so residents and traders from other countries can understand the picture better.

Intro into trading FX in South Africa

Based on 2018 figures, South Africa accounts for the largest volume in currency trading, with over $20 billion retail trading activity reported. As compared to Namibia, the second-ranking country, the figures are 10x larger. Even though the ZAR ranks only 19th in terms of worldwide online trading, people and institutions are actively trading currency pairs like USDZAR or EURZAR, as exotics are more attractive when volatility in major pairs is reduced. 

Main rules FX traders need to know

It is important to highlight that trading forex in South Africa is authorized and regulated. The Financial Sector Conduct Authority is an independent institution created by statute to oversees non-banking financial services companies, regulating the Johannesburg Stock Exchange, as well as other brokerage houses providing retail trading services for local residents. 

All companies authorized and regulated by the FSCA are Financial Service Providers (FSPs) and will receive an operating license after passing the application process. In 2021, many international trading brands are holding a license with the FSCA, which means residents can work with reputable companies and benefit from professional trading conditions. 

Financial operations 

Due to the existence of tight regulatory requirements for brokerages, the end-users are benefiting from other advantages as well, including the ability to deposit or withdraw in the local currency – ZAR. Working with a brand that does not have a license with the FSCA will mean South African residents will have to face exchange fees, as other international brands don’t allow trading accounts denominated in the local currency. 

Among the most popular payment methods, credit/debit cards or wire transfers continue to be heavily used by FX traders. Ultimately, it is important to know that South Africans are limited in terms of how much money they can send to a foreign destination per year (999,999 ZAR), which means working with a broker regulated locally becomes the most convenient choice. 

Summary

Given it is the largest economy in Africa, there should be no surprise to see South African FX regulation is in line with the highest standards. The FSCA is in charge of the brokers wanting to operate in the country, even though it is not imperative to get an FSP license. However, a regulated broker will come in hand with many benefits, including transparency, security, and lower trading-related costs.

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