Why trade with local forex brokers?
Local forex brokers have a few unique advantages compared to offshore brokers. As a South African citizen, online Forex traders can gain access to the foreign exchange marketplace to trade the world’s currencies by either using a local or offshore forex broker. The Forex market is the largest financial market in the world and there are many benefits to trading Forex online.
Optimal trading conditions due to convenient trading hours, high liquidity, and trading with leverage makes Forex trading a popular choice amongst investors. Factors to consider when opening a trading account with a broker are largely dependent on reputation, which trading platforms and financial instruments are offered coupled with customer support and the cost of doing business.
The biggest factor for South Africans to consider when choosing a suitable Forex broker is the decision to open a trading account with a local broker or international forex broker.
All Forex brokers operating in South Africa must obtain a licence with the primary regulator, namely, the FSCA (Financial Sector Conduct Authority). International forex brokers catering to South African traders are regulated in their respective jurisdictions. International Forex brokers who advertise to the South African public must have an operating licence from the FSCA.
You can check if your broker is regulated and licenced on the FSCA website: https://www.fsca.co.za/Fais/Search_FSP.htm
Many international brokers are registered in tax havens – why is this a bad idea?
Unaccountable to the tax man and regulators, offshore brokers who operate in tax havens exploit loopholes. They use dubious marketing tactics by enticing clients through get-rich-quick narratives, offering high leverage and risky trading conditions.
Credit & debit card payments to offshore brokers are subject to high fee’s and refunds when you withdraw may take up to 10 working days. With a local broker you can EFT for free and generally withdrawals are processed on the same day. Funds are usually received with 48 hours from when payments were released.
Offshore brokers who are not regulated locally, technically speaking may not market to the South African public. Being regulated by the FSCA will force these brokers to have a local office, bank account and a telephone number and email address. In cases where you trade with a broker that is not FSCA regulated, the FSCA would not be able to assist you in the event of a dispute.
Another problem with dealing with big offshore institutions is that they lack the “Mzansi” feeling, it is always better to be serviced by local people who understand you. Offshore brokers response times are sometimes slow, and this is due to them operating in multiple jurisdictions with thousands of clients, you could simply become a number and not get any personalised service.
Important benefits you get with local Forex brokers
A primary benefit of trading with a domestic broker is the ability to act quickly and expediently when it comes to misconduct or fraud.
Another one of the major benefits of trading with a locally regulated broker is that your money stays in South Africa, with one of our major banks. In some cases, where the broker has gone a step further, you receive a truly segregated account in your name with a local bank. This is the case with Khwezi Trade, who offer this type of security of funds.
By trading with a local broker, you avoid the cost and the exchange rate risk that you would normally have when depositing money with an offshore broker. You could potentially end up losing money just by depositing money with an offshore broker by the Rand strengthening.
Trading with local brokers means trading in your local currency. This is more of an indirect benefit noted by an experienced South African trader.
Consider the benefits and reduce the risks
Since you live in South Africa, you are familiar with the local purchasing power of the currency as you earn ZAR and pay your expenses ZAR. You are easily able to understand your risk management more precisely, and how much the trade you are taking is affecting your overall balance. Trading in foreign currencies may look more appealing as they are always converted back to Rands when withdrawing so sub consciously you always feel you are ‘making more money’ when in fact it is all relative.
When doing calculations for your lot sizes, it will always end up being the same value, regardless of the currency – it all depends on the value you trade per pip.
Therefore, each trader must assess the important benefits of trading with domestic forex broker.
- Domiciled and regulated in South Africa
- Trading in ZAR
- Cheaper – deposits and withdrawals (transparent payment system)
- Segregated bank accounts
- Money does not leave the country – Security of funds
- Exchange rate risk.
We recommended you find a local broker with a good reputation and a solid track record. Choose a local broker who has a history of acting in the best interest of their traders.
The most important motivating factor is to support the South African economy and to ensure our wealth does not leave the country. #Proudly South African.
Above all else, what better reason do you need to trade with a broker in South Africa other than ‘SUPPORT LOCAL’. You have a vested interest in local companies as it strengthens the economy surrounding you and helps your fellow South African businesses grow.