The issue of monetary market regulation has been prominent for many years now, although it undoubtedly came into sharper focus following the devastating financial crash of 2008. After all, this global recession was largely precipitated by excess and a scarcity of market regulations, creating a pressing need for this issue to be addressed going forward.
Not only this, but the next decade has also seen significant growth and innovation in volatile markets like a far off exchange. This includes a rising trend for smart and intuitive fintech platforms, including licensed FX and CFD brokerage sites.
This, combined with rising demand amongst an increasingly youthful trading demographic, has created new regulatory challenges for market participants to countenance. But how are these being met to extend client protections across the continent of South Africa?
The Rise of FX Trading in Africa and therefore the Associated Challenges
South Africa features a broad and eclectic regulatory forex trading approach, with this sort of derivative trading actively prohibited in some regions.
Conversely, regions like South Africa and Nigeria became huge players within the global forex market during the last 10 years, thanks almost exclusively to the right storm of rising demand and sustained technological advancement.
More specifically, the massive youth population in South Africa and Nigeria and a sustained improvement in Internet penetration in these regions (which is now estimated at 39.2% of the continent’s total 1.3 billion population) has driven widespread demand for online CFD and FX products, creating a scenario where brokerage sites are historically ready to compete totally on price as against quality, due diligence and their overall value proposition.
While this has undoubtedly triggered a hike in demand and removed many of the market barriers that previously existed in forex-friendly nations like Egypt, Kenya and therefore the Ivory Coast (in addition to Nigeria and South Africa), it’s also arguably increased exposure for traders and threatened even the foremost basic client protections.
How Have These Regulatory Challenges Been Met?
In order to satisfy these challenges, South Africa’s Financial Sector Conduct Authority (also mentioned as the FSCA and formerly referred to because the FSB) has evolved significantly and turned its regulatory focus on to the forex market.
As a results of this, all brokers must suits variety of criteria if they’re to realize a politician license, including various commitments with regards to leverage and therefore the active safeguarding of their client’s capital.
At an equivalent time, all OTC derivative brokers are required to report trades during a bid to organise CFD trades, creating a far greater sense of transparency and much-improved reporting going forward.
These measures not only function direct consumer protections, but they also minimize the danger of fraudulent activity and help to draw rogue operators out into the open.
Also, any traders who operate through a licensed and controlled broker are now ready to report perceived scams or misconduct directly through the FSCA, with this sort of transparency previously unavailable even in regions of South Africa where forex trading was permitted.
These measures have proved hugely beneficial for traders in South Africa , particularly because the demand for online products and OTC derivatives has continued to soar. Of course, this has also benefited the market, while creating a transparent regulatory map in jurisdictions where forex trading is fully legal.