Because competition is low and it is a relatively new concept people are skeptical of it. Apart from the aforementioned, the bulk of South Africa’s populace are not financially literate and shy away from the products for more traditional savings products such as investment clubs. Unfortunately the saving culture itself is lacking and over-indebtedness prevents many from investing at all.
Because social trading platforms are rendering advisory and intermediary services on regulated products they need to be registered with the FSCA as a financial services provider in terms of the Financial Advisory and Intermediary Services Act 37/2002. Costs for licences vary depending on the size and type but start around R4000 to R40 000. Liquidity and running costs also differ widely depending on the type of company.
If the trader is also directly trading stocks on the Johannesburg Stock Exchange it needs to be a registered member of the stock exchange for equities, bonds or derivatives market. Licensing costs and liquidity requirements differ depending on the registration of the member.
The exact size is unknown due to the contemporary nature of the service and subsequent lack of statistics on the market. Some of the players are:
- Saxo Capital Markets
Although it is somewhat regulated it is foreseen to become much more regulated in the immediate future as part of the twin peaks model of regulation to which South Africa is transitioning. The Financial Advisory and Intermediary Services Act 37/2002 will be replaced by the Conduct of Financial Institutions Act where more focus will also be placed on regulating Fintech companies. The FSCA is currently busy consulting some of the main Fintech players to understand how they operate and how to best regulate them.
Durban, South Africa