While South Africans are not restricted to the forex brokers they choose to use, they are urged to use ZAR denominated accounts not only for convenience but to avoid currency conversion fees.
Forex trading has become a lucrative activity in recent years as more South African traders have emerged in global financial markets.
What is a Forex Broker?
The name “Forex” may create the impression that a broker only offers foreign exchange trading.
However, the term “Forex Broker” can refer to any financial services company that facilitates the trade of retail traders as well as institutional traders.
Forex brokers offer more than just major, minor, and exotic currencies and focus their attention on providing access to several global markets including:
- Stock Market
- Cryptocurrency Market
- Precious Metals, and several others.
A Forex Broker’s main clients range from retail currency traders and investors who use the broker’s platform to speculate on price movements of currencies and other assets.
Their clients can also include large financial services firms that trade on the behalf of investment banks and other institutional and professional clients. Any individual forex broker handles a small portion of the overall volume of the foreign exchange or forex market.
Forex broker is a holistic term and different types of brokers fall within this, namely Dealing Desk and Non-Dealing Desk Brokers. Each of these has a specific business and execution model that they follow.
- Dealing Desk Brokers are Market Makers that provide liquidity to their clients and who take the opposite side of the trade. These forex brokers typically charge a fixed spread and commission-free trading.
- Non-Dealing Desk Brokers are Electronic Communications Network (ECN), Straight-Through-Processing (STP), and Direct Market Access (DMA) brokers who route the order of their clients to Market Makers, Liquidity Providers, or other participants. These brokers typically charge variable spreads with a commission fee that is either fixed or tiered.
What to look for in a South African Forex Broker
The process involved with choosing a forex broker in South Africa is a tedious, time-consuming task.
However, the process is important and several things must be considered to ensure that you choose a broker that suits your individual trading needs and objectives.
The criteria to consider when evaluating a South African Forex broker are:
- Regulatory Compliance
- Trading Account Features
- Range of Financial Markets
- Customer Support
- Trading Platform
- Education and Research
This is the first component that all forex traders must verify. Regulation refers to the necessary licensing with market regulators to provide financial services and products in South Africa.
The Financial Sector Conduct Authority (FSCA) is the market regulator in South Africa that oversees forex trading. The FSCA has strict guidelines for those applying for regulation and has strict requirements for forex brokers to maintain their licensing.
The FSCA has many duties and one revolves around providing regulatory protection to retail traders in South Africa. To keep client funds safe, forex brokers are required to keep these funds in segregated accounts with top-tier financial institutions.
These funds are not to be used for operational purposes and must be available for withdrawal by the client at any given time. The forex broker is obligated to submit frequent audits and inspections on financial records to the market regulator for review, which ensures that the forex broker can fulfil its financial obligations.
Trading Account Features
South African traders must evaluate the real money account types that the forex broker offers. The forex broker must offer ZAR denominated accounts, exempting South African traders from currency conversion fees when they deposit and/or withdraw funds.
In addition, South African traders must consider these features:
- Leverage and Margin Requirements
- Minimum Deposit Requirement
- Commissions, spreads, and overnight fees
- Additional features, bonuses, and benefits
Range of Financial Markets
Another important factor to consider is the range of markets that the forex broker offers, apart from currency pairs. Forex brokers who offer a wide range of tradable financial instruments offer retail traders the opportunity to diversify their portfolios, guarding them against market risks along with several others.
The channels through which the forex broker’s customer service can be contacted must be evaluated. When traders have a question, query, or problem, there must be more than one way for clients to contact their forex broker for help or advice.
The trading software that the forex broker offers, whether a proprietary trading platform or third-party software must be considered. South African traders must test the trading platform using a demo account to evaluate whether it suits their trading needs and objectives.
The usability, customizability, range of features, licensing, mobile trading capabilities, platform fees, and other components must be considered.
Education and Research
Forex brokers typically offer their clients a wide range of educational tools, materials and resources that they can use. These are typically used by beginner traders to help them learn more about forex trading. However, education is also useful to advanced traders who are developing new trading strategies.
It is important to evaluate the number of research materials and trading tools that the forex broker offers for instance technical analysis, fundamental analysis, an economic calendar, newsfeed, blogs, trading calculators, and several others.
Deposits and Withdrawals
The ease with which South African traders can deposit and withdraw funds is another crucial component. Apart from supporting deposits/withdrawals in ZAR, the forex broker must offer a wide range of reliable funding methods such as:
- Electronic Fund Transfers (EFTs)
- Credit Cards
- Debit Cards
- Electronic Payment Gateways
- Cryptocurrency wallets, and more.
Forex Brokers in South Africa that offer Rand Trading Accounts
Several forex brokers are headquartered in South Africa as well as international trading brokers that offer ZAR Accounts. These brokers include:
- IFX Brokers
- Khwezi Trade
- Blackstone Futures
- JP Markets
- Markets.com, and several others.