There was a debate concerning the legality of the Forex trading platforms in South Africa; however, let me assure you that derivative trading is legal.
Point to note for investors in South Africa
- There is definitely some misunderstanding surrounding how the Forex trading platforms operate in South Africa.
- There is undoubtedly the presence of scammers in the online medium, and Forex trading is no exception. However, the regulatory bodies in South Africa are consistently evolving to ensure best practices are executed.
- It is important to remember that legal platforms should not be tangled with illegal ones.
- The FSCA has played a critical role in clearing the confusion that trading with a licensed broker is very legal in South Africa.
- This statement is a sigh of relief for different categories of Forex investors willing to trade.
- For instance, a new investor might be naïve in purchasing Forex from an individual or a company.
- What the investor must understand that the industry is regulated by authoritative bodies complying with the legal aspects of trading in South Africa.
Still, confused to trade in South Africa?
Let me clear the air; In general, the negativity seems to stem from a diverse understanding of how Forex works. Take it as a type of contract of difference (CFD) trading.
It is merely a financial tool that grows its value from an original asset that might include any Forex currency pair or equity exchange rate.
CFD develop value from asset price. This is the reason they are known as derivative. During trading, neither the CFD provider nor the trader can assume asset’s ownership
Even though the liquidation of JP demonstrated that problems do exist, but the presence of any illegal currency exchange was not visible.
Because of eliminating all apprehensions and malpractices, the FSCA has recently initiated new legal stipulations to secure online Forex trading.
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Significance of ODP license
Amid all scams, the regulatory authorities in South Africa have initiated ‘Over the counter Derivative Provider’ (ODP) that ensures brokers exercise due diligence and take appropriate measures for their client’s trade.
The advantage of this new order is that it gives more leverage to the clients. One major feature of this new order is initiating strict capital adequacy rules when trading high-risk products.
The value proposition of this new regulation
Now regulators of the Forex industry in South Africa will have access to all details of the transaction. This is by far a major milestone that the South African Forex industry has achieved. The client is now in ascendency and protected by a legal framework designed by the South African authorities.
It is also beneficial for the brokers. The legal brokers are the only available resource for the investor.
You can easily start Forex trading in South Africa. There are no restrctions and you are legally covered if you trade with regulated brokers. You should primarily focus on learning and acquiring trading skills.