Forex Industry in South Africa – Leading Market

The demand for the forex industry has been thriving worldwide and South Africa is not an exception either. To look at the industry and its characteristics, as of today, it has a growing number of traders, pretty much-increasing demand among investors as the environment gives them the opportunity to execute the process efficiently and in addition to that, here we can see an increased number of brokers and a well regulated financial sector. According to valid sources, the estimated number of forex traders in South Africa only equals 190 000. Other countries in Africa that are having a valuable number of traders is Nigeria, which is the most populous country in the African continent with 200 000 traders, and another country that should be mentioned in terms of forex trading – is Kenya, with around 50 000 forex traders. The whole rest of Africa makes up 750 000 traders and in total, we can say that there are 1.3 million traders in the whole continent.

Demand for the Forex in African countries

In terms of local retail forex trading demand and global currency swaps in Africa, we can boldly say that South Africa takes the leading role. Financial experts believe that there are a number of reasons why this can be happening, however, one of the main reasons is the strong and regulated financial sector paired with the local demand from the investors’ side. The fact that the investors are given the good opportunity to maneuver on the market without extra prohibitions adds general strength to the currencies.

The detailed information about the regulations in African countries will be discussed later in the article, however, the importance of them should be mentioned here as well, because it directly affects the financial market and makes South Africa take the leading place in terms of foreign exchange trading volume. The best way to find the information about the brokerage companies that are regulated under the regulatory bodies (which majority of people claim to be a very difficult and tricky process) is to search for the reviewed Forex brokers since it provides detailed information about the technical characteristics, leverages and offers the reviews from the clients perspective.

As we have mentioned above, South Africa is also taking the leading role in the size of deposits with retail forex platforms at $742, meaning that the people from South Africa and their traders are most valuable for the forex brokers since the average deposit made by them is higher than in other countries. South Africa is followed by Nigeria with the amount of $514 and Kenyan traders occupy fourth place with $363.56.

In terms of  Trading Volume of Forex, South Africa is taking the leading role in this case too, with a total exchange volume being $20.37 with all the instruments that the foreign exchange market and its trading platforms offer to their clients. Even though we say that Nigeria is the most populous country in Africa, its daily exchange trading volume is $314 million and the same statistic of Kenya is around $192.66 million.

To make the statistics even more clear, it is a good idea to compare it to the countries that are having a very advanced forex market for example those of Russia and India, and their daily exchange trading is $46 billion and $39 billion respectively, however, the countries such as Turkey or Brazil are behind the daily trading volume of South Africa. Because of these fascinating numbers, the South African Rand is also the most traded currency in Africa and occupies 18th place in the world currency ranking.

Regulatory Framework

It can be said that the South African financial market is becoming a popular market for both traders and brokers. The main reason for that can be named to be the role and work that is done by the Financial Sector Conduct Authority (FSCA). This is the organization that gives the companies the license order to operate in the forex trading market in South Africa and also layout the main rules and laws that should be taken into account while being a broker or a trader and all these create a friendly trading environment in the country. The FSCA is the pioneer regulator on the African Continent with having more than 1000 registered financial institutions.

Nigeria – as we have outlined the regulatory framework of South Africa, we should also mention the same policy in Nigeria. Surprisingly or not, Nigeria is the second-largest market in Africa and in terms of forex retail trading, it does not have the regulations for the sector but is considering establishing one. This means that the Nigerian retail forex trading sector is self-regulated, which has tons of advantages and disadvantages. One of the most important disadvantages, in this case, can be mentioned to be the fact that Nigerian Investors mainly prefer to choose the brokers that are regulated under the FSCA framework in order to make their funds ensured by the regulatory authorities.

Kenya – in case of regulations in Kenya, the country has suggested their clients regulate their actions under the Capital Markets Authority framework since 2018, since one of the leading counties in terms of forex trading wants to ensure the protection of t investors fund in the country. However, there still might be some problems since the CMA is new and still in formation, which means that for the financial companies it is easy to get the license to operate on the market. Finally, all those circumstances have made the South African FSCA the most important and reliable regulatory body in the whole continent.

South Africa – Hub for the Brokers

The factors, such as existing regulations that give the financial institutions bigger flexibility. The strong financial sector and growing demand from the population are ones that make the South African financial market very attractive for the brokers that make the country the hub for forex trading.

The growing demand from the South African traders was so vivid that the world’s most famous and well-known brokerage companies decided to regulate themselves under the FSCA framework and started opening local offices in South Africa. Other than the efficient regulations that brokerage companies are provided by the FSCA, it also gives them the possibility to operate on the other African markets, such as Nigeria, Kenya, Tanzania, Botswana, and Namibia. Why other countries agree on the FCA regulated companies to operate in their market is that investors are provided with the legal framework to execute their activities. There is also no restriction on the leverage of CFDs and FX, they can also offer indices, commodities, cryptos, etc. this is not the common case in terms of foreign regulators such as ESMA, ASIC, and FCA that are having imposed caps on many features. This is why the brokerage companies prefer to register with the FSCA and expand their network in Africa.

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