Africa is the new biggest market for Forex trading, and South Africa is the continent’s leading country. What this interprets is that there are lots of traders in the South African Forex industry.
If you’re interested in trading Forex in South Africa, one of the questions you’ll ask is, “is Forex trading a legal business in South Africa?”. With government restrictions in other countries in Africa and other parts of the world, it’s essential to know just how safe you are as a South African trader.
I’ll be answering that question in this article.
The Legality Of Forex Trading In South Africa
Is Forex trading a legal business in South Africa? The answer is Yes. Forex trading is a legal business in South Africa.
South Africa is the country with the healthiest Forex trading market in Africa, thanks to regulation. The Forex trading industry is regulated by the FSCA (Finance Service Conduct Authority). Therefore, trading is safe to a large extent.
For a Forex broker or trading company to operate in South Africa, they must obtain a license from the FSCA. As a Forex trader, you can trade with FSCA licensed forex brokers and be assured that your funds are safe.
If there is any problems with your broker, you won’t lose all your money. In fact, you will get compensation even if not 100%.
Forex Trading Rules In South Africa
On the side of the trader, KYC (Know Your Customer) is required. As the market is regulated, there is no room for anonymous traders to prevent money laundering.
To open a Forex trading account, deposit, and trade, you’ll have to complete your KYC documentation with your broker. This requires you to provide proof of identity for verification. Documents you will provide include a valid ID and a recent utility bill.
For ID, you can present your National ID, international passport, or driver’s license. For utility bills, you can provide a receipt of your electricity, water, internet, TV subscription, etc. This is to verify your home address.
On the part of brokers, they primarily need to comply with operating capital minimums. If the broker offers CFDs (Contract for Difference), extra measures are taken. Brokers must ensure that their traders can handle the market’s volatility.
It isn’t against the law to trade with non-regulated brokers. There are still non-FSCA-licensed foreign exchange brokers in South Africa, although most of them are foreign. As a trader, you should trade with regulated brokers for the safety of your funds. Even if the broker is foreign, it should be regulated by foreign regulatory bodies like those in Cyprus, the UK, and Australia.
However, it’s easier to trade Forex in South Africa with an FSCA-regulated broker than foreign regulated ones. Most especially when it comes to funding your forex account. You’ll be dealing with an SA bank with a locally licensed broker and can quickly deposit ZAR. On the other hand, with a foreign broker, you’ll be dealing with foreign banks, and there’ll be a need for currency conversion.
Furthermore, the FSCA-licensed brokers allow you to open a ZAR-based account. With foreign brokers, your account will be based mostly on USD or EUR.
Cost Of Trading Forex In South Africa
The South African Forex industry is one of the best-emerging markets worldwide. As an interested trader, what would it cost to trade forex in South Africa?
Well, the South African Rand is as volatile a currency as other currencies. The mainly traded pairs include GBP/ZAR, USD/ZAR, AUD/ZAR, and CHF/ZAR. Unless you don’t want to trade the Rand, you’ll be most interested in these currency pairs, especially the first two.
In South Africa, your forex profits are taxed. You are to pay about 19 to 39% of your profit depending on how much it is. The process isn’t very complex, and your forex broker can help you manage it.
It’s less likely that your broker will charge you for trade. However, indirectly you pay little commission when you pay for spreads. The difference between the cost and selling price of pips when you buy currency pairs goes to your broker. It’s little, usually 1 or 2 pips, but the profit is reasonable if it’s a successful trade.
Brokers are likely to charge withdrawal fees when you send your earnings to your bank account. This is another reason why FSCA-licensed brokers are best, as the fees will be less. Foreign brokers will require wire transfers, which attract high fees.
In summary, it is legal to trade Forex in South Africa. With regulation by the FSCA (Finance Service Conduct Authority), the market is watched over by the government to ensure there are no illegal activities on the part of the traders and brokers. You will be safe trading Forex in South Africa if you adhere to the rules and regulations laid out by the FSCA.