Forex brokers in the European Union are having a terrible time right now. The looming Brexit conditions, the overwhelming pressure from ESMA and the general state of affairs have really tanked their performances. However, out of all of those reasons, ESMA restrictions are probably the largest problems.
Because of restrictions on CFD trading, a complete ban on Binary trading, restrictions on trade benefits, profits have decreased dramatically. In addition to that, the brokers are struggling to attract new customers as the marketing and sale of CFD and Forex products are also restricted. It’s ok to rely on your already existing customer base, but that as well, will soon be gone, therefore those brokers needed a place to flee to.
Safe Haven of South Africa
South Africa is becoming a real hub for Forex brokers, as Forex trading activities are becoming more and more popular there. The country is already able to host quite a substantial amount of foreign companies, according to this best South African Forex brokers list, where companies like XM and Markets.com are mentioned. The financial regulator in the country, FSCA is also a module of financial institutions in Africa and a force to be reckoned with. Therefore these brokers have a guarantee that no scams will be their direct competitors.
But sheer popularity of the Forex market can’t determine an ideal place to flee to can it? Well, you’re right about that. The South African market is quite small, it’s somewhere around 56 million people, and judging by the number of traders and the number of brokers, it would be hard to truly conquer it. The reason why it is such a popular destination is that it has an English speaking population, has sophisticated financial institutions and is in close proximity of the EU time zones, which helps brokers avoid a complete allocation of their staff.
The same can be said about Australia and New Zealand, they both have sophisticated financial institutions and English speaking populations, but they are a completely different story. For example, a license with the ASIC (Australia’s financial regulator) could cost way too much, plus the time zones are way off, so allocation of the general staff will be required. New Zealand is just way to small to even bother with, sure they can open up a branch there, but transfering the HQ to the island is unrealistic. Therfore South Africa is what remains as the primary destination for these brokers.
Soon enough, we will be able to see some exclusive deals for South African Forex traders, judging by the number of applications the FSCA has been receiving from EU brokers for a license.