Forex broker IG Markets is making efforts to increase its market share in the South African market, as evidenced by the materials received by Finance Magnates. The source of the documents states interesting details of this story. The FSCA regulator, the South African Financial Conduct Supervision Authority, made a decision yesterday to lift a number of legislative obligations from IG Markets. This relief is temporary, and it is due to the fact that the company sent a request to the regulator for a license to operate in the financial services market.
One of the largest players in the online trading services market in Europe – the IG group of companies – is represented in South Africa by its IG Markets South Africa division. The FSCA has granted the subsidiary a license under the FSP number. 41393, but it is limited to traders’ order execution services, while the broker is not authorized to trade CFDs in South Africa.
IG Markets South Africa has yet to receive regulatory approval to issue, trade and promote OTC speculative contracts in the South African market, as confirmed by FSCA officials. As a result, the broker cannot provide intermediary services in the role of a supplier of such derivatives, according to the restrictions of the existing license.
The company has already attempted to enter the ODP (over-the-counter) market in the summer of 2019. The application for the elimination of the financial license restrictions in order to obtain the right to supply these instruments was rejected by the regulator without explanation.
However, IG Markets South Africa lawyers have found grounds to appeal to a South African court to appeal the FSCA decision. As a consequence of the filing of the claim, the regulator was forced to relax the restrictions of Regulation 2 (1) (a) of the FMA Rules for the broker for the period before the court order.
Meanwhile, the broker continued the process of expanding its presence in the market.
There are various legal conditions for such an exception. In particular, the exemption period may expire if the broker does not have time to submit a new application for revising the license terms at the required time. In addition, IG Markets does not have the right to promote CFD products among new clients, as well as advertise, launch marketing campaigns focused on providing services for the purchase and sale of these derivatives.
IG Markets is also required to notify existing clients of the limited timeframe for trading CFDs and similar derivatives by January 9, 2021.
The regulator also has the right to request from the broker a number of financial indicators of existing clients, their percentage of capital for hedging possible trading risks, the structure and volume of speculative positions.
The South African financial market is highly regulated. The Financial Sector Conduct Authority has the power to sanction Forex brokers who violate the regulations set out by the FSCA for the financial sector.
This fact is a strong point for South Africa in terms of attracting foreign companies, institutional investors and forex brokers aimed at expanding their global presence. A relatively low level of competition, a regulated financial services market and transparent rules of the game place South Africa in the top 10 strongest countries in the global capital market.