Forex trading in South Africa
The Rand was established as the official currency of South Africa since the year 1961. Since then, it remained to be the most traded currency against the US Dollar. Due to the European crisis there has been considerable impact on the global economy and by extension also on the South African local economy too. It has also affected the Forex trading in South Africa.
Application of Forex trading Regulations in South Africa
It began around 2 decades back. It was then when retail over counter forex trading in South Africa started. Local companies began offering forex trading facilities to retail traders using offshore banking. At that time there was inadequate regulations on this forex trading industry. However, as the volume of trade grew as the case in many western countries, there more frauds and malpractices were observed. This led to the need to regulate the business of forex trading. Therefore, it became necessary for traders to select authorised brokers to conduct their business of trading.
Forex trading in South Africa is regulated by the FSB. Other nations have their own regulatory bodies. It is a legal practice to trade forex in this nation. It is done by a local or overseas broker. The local platforms are not very profitable as the spreads are far wider than the offshore brokers.
Forex trading brokers in South Africa
Forex trading can be done from brokers or platforms and through the futures market. In case of offshore trades, due to limited facilities of trading platforms, most traders select to trade through an offshore broker. Offshore forex brokers are reliant upon major clearing houses to give liquidity and protect broker from unnecessary risk.
The brokers who offer trading facilities to retail traders without liquidity support often rely upon the traders losing their money in order to turn a profit and can be prone to price manipulation.
Brokers make their earnings through the spread on the transaction. The more money the trader has the more money the broker makes.
The forex trade in South Africa has increased since its very inception. This clearly indicates the success of a country’s macroeconomic and sustainable fiscal along with maturity of the nation’s financial markets.