The South African branch of the broker IG Markets is experiencing difficulties with its forex license.

15-01-2021

Forex broker IG Markets is making efforts to increase its market share in South Africa, as evidenced by the materials received by the Finance Magnates editorial office. The source of the documents states interesting details of this story. The day before the South African Financial Sector Supervisory Authority, the regulator FSCA, decided to lift a number of statutory obligations on IG Markets. The relaxation is temporary, and it is due to the fact that the company has submitted a request to the regulator for a license to operate in the financial services market.

One of the biggest players in the online trading services market in Europe, IG Group is represented in South Africa by its IG Markets South Africa division. The FSCA regulator has granted the subsidiary a license under FSP. No. 41393, but it is limited to order execution services for traders, while the broker is not authorized to trade CFDs in South Africa.

IG Markets South Africa has not yet received regulatory approval to issue, trade and promote OTC speculative contracts in the South African market, which is confirmed by the representatives of FSCA. As a consequence, the broker cannot provide intermediary services as a provider of such derivatives, according to the restrictions of the existing license.

The company has already attempted to enter the ODP (over-the-counter assets) market in the summer of 2019. An application for the elimination of financial license restrictions in order to obtain the right to supply these instruments was rejected by the regulator without explanation.

However, lawyers for IG Markets South Africa found grounds to appeal the FSCA’s decision to the South African court. As a consequence of the lawsuit, the regulator was forced to relax the restrictions of Regulation 2(1)(a) of the FMA Rules for the broker until the court ruling.

In the meantime, the broker continued the process of expanding its market presence.

There are various legal conditions for granting such an exemption. In particular, the term of the exemption may expire if the broker fails to file a new application for the license reconsideration in due time. Besides, IG Markets has no right to promote CFD products among new clients, as well as to advertise, launch marketing campaigns oriented on provision of services on purchase and sale of these derivatives.

IG Markets is also required to notify existing clients of the limited duration of its CFD and similar derivatives trading services until January 9, 2021.

The regulator also has the right to ask the broker a number of financial indicators of existing clients, their percentage of capital to hedge possible risks of trading, the structure and volume of speculative positions.

South Africa’s financial market is highly regulated. The Financial Sector Conduct Authority has the power to sanction forex brokers who violate regulatory rules as defined by the FSCA for the financial sector.

This fact is a strength for South Africa in terms of attracting foreign companies, institutional investors and forex brokers aiming to expand their global presence. The relatively low level of competition, the regulated financial services market and the transparent rules of the game allow South Africa to rank in the top 10 strongest countries in the global capital market.

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