The Role Of South African Forex Brokers In The Global Financial Markets
South Africa is one of the most important locations on the global Forex map, which sees the local currency, known as the South African Rand (ZAR), being traded against all major currencies from across the world. The ZAR is often referred to as an exotic currency, which witnesses a high amount of volatility and lower volumes than the other main currencies in the market. The ZAR has its own distinctive characteristics, but Forex traders from South African often invest in other major and minor currency pairs that provide better stability in terms of volatility and cost of trading.
South Africa is a key point in the commercial route between the East and the West, which connects the Asia-Pacific region to the European sub-continent and the Americas. Due to the strategic location of the country in international trade, South Africa has achieved a prominent place in global economic affairs with the South African economy being termed as one of the fastest growing economies in the world. Forex trading in South Africa is also beginning to receive more popularity, but there are several restrictions on FX trading and investments that traders should be aware of before choosing Forex brokers from South Africa.
Regulatory Guidelines To Consider Before Choosing The Best Forex Brokers South Africa
Forex traders from South Africa do face quite a lot of restrictions while trading the FX markets. First of all, all Forex trading and other non-banking financial companies are regulated by the Financial Services Board (FSB) of South Africa. The FSB is an autonomous regulatory agency that works under the South African parliament for maintaining a safe and secure financial investment market in the country. The FSB is designed as a statute for the welfare of public investors, which is done in order to protect the people of South Africa from being exploited by fraudulent financial companies.
The FSB has limited entry into the Forex market for native South Africans by stipulating a maximum investment of 4 million Rands at overseas Forex brokers. 4 million Rand is close to $300,000, as per the latest exchange rate, and is the maximum limit allowed for investors. The FSB also clearly states that such an investment can only be made by qualified investors, who are above 18 years of age and have a good standing with the South African authorities. Any trader that has run into trouble with the law in the past shall be banned from investing in the FX market entirely. The FSB has also required investors to be verified taxpayers, and investors have an obligation to obtain the necessary clearances from the South African Revenue Services before investing their money in their Forex trading accounts.
The FSB has also specified several stringent conditions on currency trading, which may make it difficult for local companies to offer competitive spot trading products to South African Forex traders. Therefore, most brokers operate as offshore clearing houses, which are deemed legal in the country. Traders are free to choose any Forex broker of their choice, provided they satisfy all the conditions imposed by the FSB. It is common for mainstream companies to appoint affiliates and white label service providers for setting up a branch office in South Africa, but it is vital for all top Forex brokers in South Africa to be regulated and supervised by the FSB.
Forex trading in South Africa is still in its primary stages, with the FSB gradually modifying its policies to conform to the regulatory standards employed by European and American regulators. However, since South African traders are free to invest their money with any overseas FX broker, there is a significant chance for broker scams and financial irregularities, particularly if a trader chooses a non-regulated entity. South Africa witnesses a tremendous amount of broker scams that have resulted in millions of Rand in losses for investors.
The FSB has started to implement numerous policies to reduce instances of financial scams, which has begun to yield results. South African Forex brokers are now required to give priority to preserving the integrity of the financial markets, which can only be achieved by protecting traders and investors against financial abuse. Newer FSB regulations should help in countering broker irregularities, and things are indeed looking bright for South African investors.
What Are The Precautions While Choosing Overseas Forex Brokers?
If you are unable to find the best FX broker in South Africa that is close to your home, choosing overseas brokers may be able to provide you with much more competitive services and affordable brokerage accounts. A majority of all Forex trading companies in South Africa operate through overseas channels, mainly due to the regulatory guidelines of the FSB. Therefore, you should consider the advantages of trading with global Forex brokers that offer customized services for South African traders. Nevertheless, you have to adopt some safety measures that should keep you protected from dishonest brokers.
While choosing an international Forex broker, South African traders should consider trading with companies that are located in countries with the best regulatory practices. Brokers from Europe and the US offer better safety of funds and an overall secure trading environment, which should be a better option for South African traders due to their geographical location. A large number of brokers from these countries also have their respective offices in South Africa, which should provide better security of funds and timely access to services. Location plays a key role in deciding a broker, especially when one considers the implications of gaining access to a broker that does not have a representative office in South Africa.
Another precaution is to choose a broker that has a good history of services that has the least amount of conflicts with its customers. Forex trading is a volatile market, and as with every other business, Forex companies may have several instances of customer complaints and other broker issues. However, it is how a company reacts to its internal problems that mark the difference between a top quality broker and a dishonest service provider. We have reviewed several Forex trading companies, and have created a list of preferred South Africa Forex broker alternatives that can provide you with high-quality FX brokerage accounts.
South Africa FX Broker Options For Amateur Traders
New traders may find it difficult to invest in the financial markets in a productive manner, mainly due to the volatile nature of the market. Several psychological factors may also prevent amateurs from replicating the success enjoyed by professional traders. As a new Forex trader, never commit the mistake of investing way too much money into your trading account without learning the different components of FX trading and all the risks involved in the market. As a beginner, you should first take some time to educate yourself about the markets and have a thorough understanding of the different dynamics in the market, which should hold you in good stead in your trading ventures.
Using a demo account is also paramount to having a successful Forex trading portfolio. Several Forex brokers from South Africa and other leading companies offer unlimited demo accounts to help traders to prepare themselves in the numerous aspects of FX trading in a better way. Demo trading is the best way to learn Forex trading without risking their money. Sometimes, brokers may only offer a demo account for a limited period; therefore, you have to either pace your trading according to the demo account duration or choose an unlimited account that does not impose any trading limitations.
How Should You Respond To A Broker Scam?
There is a high probability for South African traders to be subjected to financial abuse or broker scams, especially if they are not careful about their choice of a Forex broker. A dishonest broker will always find new and innovative ways to sell their services to unsuspecting traders. These companies can have false regulatory information, attractive bonus packages, and even trading conditions that may sound too good to be true. Therefore, newbie traders might be lured into making a significant deposit, without worrying about the long-term consequences.
If you are a victim of a broker scam, your first course of action is to get in touch with the FSB to understand your rights as an investor. Consult with FSB’s complaint resolution team to gauge whether you can initiate any legal action against the perpetrator. If your broker’s regulatory status is covered by the FSB’s regulatory guidelines, you can be assured of getting professional support for your problems. On the contrary, if FSB is unable to help you, you should seek other professional advice and try to contact the regulatory organization that claims to supervise and monitor the activities of such a company. In most cases, regulatory agencies are known to be severe in their approach against broker scams, which should help you to receive some kind of support during your ordeal.
If all else fails, you may approach the numerous online customer testimonial forums and other review platforms for arbitration. Some brokers are concerned about their online reputation and may be willing to resolve its issues with existing customers. Online reviews can also serve as a reference point for other future traders, who can count on your experience while dealing with questionable FX brokerages.
Regardless, it is always better to be safe than sorry in the world of Forex trading. The industry witnesses a massive amount of scams, which only increases as more and more traders enter the markets. Brokers often lure amateur traders into the pitfalls of the market without giving them sufficient information about the risks of Forex trading. As a Forex trader and a long-term investor, irrespective of your expertise, you should only choose a reliable Forex trading company that acts in their trader’s best interest.