FSCA: IG Markets Unauthorized to Provide OTC Derivative in South Africa


South African regulator, the FSCA has clarified that IG Markets unauthorized to issue, sell, or make a market in OTC derivatives.

January 07, 2020 | AtoZ Markets The Financial Sector Conduct Authority (FSCA) of South Africa recently exempted IG Markets from certain regulatory requirements pending the finalization of its application for a new license.

IG Markets South Africa is part of the IG group of companies, which is Europe’s largest online trading service provider. The company is licensed by the FSCA (FSP. # 41393) to provide execution services, but its CFD products are not licensed in South Africa.

FSCA says IG Markets is not authorized to act as an OTC derivative provider

The FSCA has made it clear that the forex broker is not authorized as a provider of OTC derivatives and therefore cannot issue, sell or advertise such instruments under its current license.

In June 2019, IG Markets applied for a license extension to be able to operate as an over-the-counter derivatives provider (ODP). However, the local regulator rejected the application.

Read also: FCA Ban on Crypto Derivatives Comes Into Force

The refusal of the regulator prompted the South African branch of IG to appeal this decision in court. Until the court decides whether to approve or reject IG’s request to reconsider the application, FSCA exempted IG Markets from complying with Regulation 2 (1) (a) of the FMA Rules.

Clients of IG Markets can trade CFDs

The exception is granted under various conditions, in particular, it will expire if IG Markets does not submit its request for revision within a certain period. Moreover, the company should not offer derivatives to new customers, nor should it avoid advertising and marketing campaigns to promote these instruments.

Existing clients of the broker can trade CFDs and similar products, but they need to be notified that the services are provided under the exemption by January 9, 2021.

In addition, IG Markets must provide the regulator with a list of existing clients and disclose certain operating metrics such as their trading exposure and the level of capital it reserves to offset the associated risks.

As a reminder, the activity of forex brokers in South Africa is regulated by the Financial Sector Conduct Authority. FSCA issues licenses and may impose sanctions on companies that violate the operating principles for the financial industry.

South Africa has a strong and well-organized financial market and therefore the country attracts forex brokers looking to expand their business. The country is among the top ten leaders in capital markets. At the same time, competition here is much lower than in other popular jurisdictions.

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