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Picture: 123RF/PAKIKORN YOSPIMSARN
Picture: 123RF/PAKIKORN YOSPIMSARN

There is no time like the present for investors to look into forex (FX) trading in SA, as demand in the region has grown exponentially in recent years between their well-regulated finance sector, investors, brokers and traders. 

Estimates indicate that there are presently close to 200k traders in SA, who are collectively adding strength to their economy. In fact, due to the interest and demand for FX in SA (and Africa in general) brokers worldwide are using SA as their operations hubs in Africa. 

SA is showing particular dominance with their retail forex market. It’s important to note that retail forex trading only makes up about 5.5% of the volume of the forex market, since most of the volume stems from governments, banks and the largest financial institutions. However, SA is the largest in Africa in that regard, with $20.376m traded daily in April based on April 2019 BIS statistics

With this in mind, there is much that investors and individuals that are interested in investing in this market need to know before taking the next steps, and the pros certainly outweigh the cons. The transaction costs associated with trading have gone down, thanks to higher numbers in terms of competition between brokerages, internet usage and technological advancements.

Additionally, the forex market is now more accessible than ever for retail investors that are looking to make investments or keep track of currency movements, thanks to the increase of digital trading platforms. 

Investors can trade in the SA forex market in two ways — through:

About JSE currency derivatives

There are many currency derivatives that are offered by the JSE which track the rand exchange up against other currencies. Clearing and settlements are managed by the clearing house of the JSE, with each transaction being settled in rand, without the physical delivery of the underlying foreign currency. 

Among numerous options, the three primary types of derivatives on offer at the JSE are currency futures, currency quanto futures, and currency options. While you won’t be able to purchase derivatives directly from the JSE, you can do so through a registered broker, which would also ensure the fulfilment of JSE regulations. It’s best to visit the JSE website for details on how to find the best broker based on general investment style.

About spot forex trading

Unlike currency derivatives, spot FX refers to transactions in which payments and delivery are instantaneous. Any investor who is interested in taking this route or CFDs best do so through brokers that are regulated by the Financial Sector Conduct Authority (FSCA) or other equivalent tier-one brokers. It is advisable to verify their credentials before moving forward.

As with any other transaction, especially for novice investors, one must be weary of scams in both the cryptocurrency and forex markets. The one downfall of the digitisation of processes is the ease in which investors can get conned at any point within the trade life cycle if not working with brokers that are regulated by the FSCA.

SA’s FX sector is showing no signs of slowing down, and investors looking to get on board best do so sooner rather than later, and go about it legally through registered brokers to play it safe while reaping the benefits of the market.

This article was paid for by Compare Forex Brokers.