There’s a lot of confusion regarding the financial markets in South Africa, especially around new and emerging markets like Binary Options. Although certain legalities permit certain trading activities, it is vital to clear the air, leaving no ambiguity for a finance enthusiast.
While it may be true that trading Binary Options with a practice account comes with zero consequences, you need not understand all regulations governing the asset class. Suppose you have an intention to go pro or use live funds. In that case, you should know the regulators and licenses that permit or prohibits you from trading Binary Options in South Africa.
This article will answer all the questions asked by beginner Binary Options traders in South Africa. Without wasting much time, let’s get to it.
Is Binary Options Legal in South Africa?
Despite the global expansion of binary options trading, financial regulators in South Africa are yet to implement policies to regulate trading the asset class locally. However, trading binary options in South Africa isn’t prohibited; interested traders can work with foreign brokers who offer SA residents services.
While the emergence of any policy to regulate binary options in South Africa isn’t looking likely near term, it doesn’t stop traders in the country from trading the asset class.
What Countries Regulates Binary Options Trading?
Many countries regulate Binary Options Trading. However, each policy passed by a country is only applicable to traders, brokers, and financial institutions registered within the country. Although, in some cases, a country’s policy may also extend to their expatriates; thus, the trader’s registration and activities with the brokerage platform will depend on the regulatory policies laid by their country of origin.
Some countries with big financial markets having regulatory policies on Binary options trading are;
- European Union (European Securities and Markets Authority)
- Belgium (Financial Services and Markets Authority)
- Australia (Australian Securities and Investments Commission)
- Cyprus (Cyprus Securities and Exchange Commission)
- United States (Securities and Exchange Commission)
- Israel (Israel Securities Authority)
Do Licensed Binary Options Brokers Operate in South Africa?
The Financial Services Board (FSB) of South Africa does not regulate Binary Trading Options activities in the country through licenses. However, Binary Options Brokers licensed overseas can operate within the country.
For now, South African regulatory bodies are maintaining neutrality regarding Binary Options Trading in the country. Offshore brokers can provide their services in the country without restriction.
Is it Safe to use Foreign Brokers to Trade Binary Options?
As stated earlier, regulators in SA are neutral to Trading Binary Options in the country. This situation does make a trader raise an eyebrow because it means that the brokers can operate without control or supervision. Thus, it is not uncommon to have unreliable or sub-standard brokers offering Binary Options trading in the space.
While that may be true, it is always advised to work with licensed brokerages that were licensed by reputable financial regulators.
Can I Test a Broker Without Depositing Money?
Most Binary Options Brokerages will offer demo accounts to traders who want to try out their platform before committing real money to trade. While a demo account only simulates real-time liquidity, beginners need to know that the environment is slightly different from live trading.
Future Expectations of Binary Options Trading in South Africa
At this point, it’s unclear when or if the FSB will establish policies to regulate the trading of the asset class. However, what’s certain is that the space is currently exposed to low-standard brokerages because there’s no regulation. If there is a change in SA regulations and licenses, you should keep your ears to the ground.
At any rate, with the expeditious growth, we expect the popularity of Binary Options to be at par with Forex soon. Although we still have a long way before Binary Options replicate the liquidity recorded in Forex and stocks.
Conclusion
The Financial Services Board (FSB) is the only non-banking financial regulator overseeing all trading and trade-related activities in South Africa. Following conventional classifications, the FSB considers Binary Options as Over the Counter (OTC) derivatives instruments.
While this may be true, Binary Options brokers operating in SA are not required to obtain a Financial Services Provider License.
