“Mind The Gap!” – The life and times of a man on the move Episode 73

The analytical nature of South Africa’s traders is a good reason why we all need to think locally.

In this weekly series, I look back on what stood out, what was bemusing, amusing and interesting during my weekly travels, interesting findings within the FX industry and interaction with an ever-shrinking big wide world. This is purely observational and for your enjoyment.

The gold rush is still on… but today it’s electronic

Johannesburg, one of my favorite cities anywhere in the world, is a beautiful urban garden, lined with perfectly manicured trees and flowers including the Protea and Jacaranda, which amplify the sensory experience of driving through expanses of luxury neighborhoods and first class entertainment complexes offering some of the highest standards of living in the world.

Sandton is the wealthiest district in the whole of Africa, and home to the financial center for the entire continent

In the 1880s, the city became established by pioneers who arrived in southern Africa in search of one of the Cradle of Humankind’s many precious mineral resources – gold.

Unlike most modern cities which relied on the industrial revolution to define their prosperity and establish them as global economic, manufacturing and social centers, Johannesburg was not built around a river, thus it was never built as an industrial city, instead becoming the colonial power in precious metal trading, which itself paved the way for it to become a massive international commodities trading venue, and the gilt-edged, rock solid banking structure that supported it.

Today, Johannesburg is Africa’s financial strong point. A first world, completely westernized metropolis with some of the best infrastructure in the world and one of the most entrepreneurial populaces.

This week, I spent another few days in and around the city, largely in individual meetings with Introducing Brokers from across the Gauteng Province, and some interesting topics came up.

I had noticed over the relatively long period of time that I have spent over recent years in South Africa, that many Introducing Brokers that have made a vast effort to maintain a good quality service to their clients had become somewhat jaded by the influx of overseas firms that have managed to spread their b-book/market making lack of scruples across the IB network, with some disastrous consequences, including IBs not being able to act on behalf of their clients because unregulated companies from the Middle East, Russia and Israel have come in and simply taken deposits from clients with no intention of offering a trading environment, instead running away with the money.

South Africa’s banks, such as Standard, Mercantile, FNB and Capitec , are among the best in the world for stability and modernity

Now, an air of caution exists to say the least.

And rightly so. This week I met with three different IBs who serve a diverse client base, and actually develop their own trading software in order to provide their clients with longer term trading value. Many of them, and this appears to be quite unique to South Africa, will drive long distances and spend a day with traders, showing them how to use analytical tools, and keeping in touch via mobile messaging to be on hand if needed thereafter.

This is genuinely extensive customer service. Traders are charged a consultancy fee, and then a software license, and maintain regular contact with their IB as long as they are able to trade, with the intention of mastering some technical skills and becoming better traders.

Pragmatism was the centerpoint of most of these conversations this week. IBs do not want a quick churn of their clients by a large, faceless broker that treats them as a Cost Per Acquisition or a ‘lead’. They want investment of time and total alignment between broker, IB and client.

We have all seen these independent and unaccredited ‘signals’ being peddled across various FX forums aimed at novice retail clients, and herein lies a massive problem.

I know of many extremely bogus ‘education’ providers who maliciously use demo accounts and sell a ‘cure all’ software for vast sums of money, expecting people to believe that by listening to a totally unqualified upstart, they will get a huge percentage return. It is simply not possible. There are examples of this in London, Toronto, and until the Australian government decided to lock them up, Sydney.

The refreshing openness of South Africa’s IBs struck a chord in that instead of boasting with imagery of supercars and yachts, or believe it or not in the case of one notorious oddball, a helicopter with an MT4 terminal in it (!),  the IBs of Johannesburg and Pretoria are down to earth, often retired software engineers from either government projects or large consultancy firms, and do not have those pie-in-the-sky aspirations, instead looking to maintain a good quality small business and have personal contact with clients regularly.

Johannesburg’s population is discerning, well educated and used to extremely high standards

This is a great development ground for the retail FX business.

If a broker would put some effort behind supporting some of these fabulous little enterprises by helping them get regulated so that they can be onboarded to Western brokerages as IBs, instead of buying leads, we would see a very sustainable part of the market flourish.

That leaves me to conclude that I will reiterate what I have said before. In these days of brokers looking to relocate or expand to new regions, you could do alot worse than come to South Africa. It is a world of opportunity, has a very good regulatory structure which only takes around 4 months to become licensed, first class banks, a very hard working and high quality talent base, is part of the Anglosphere and of course a massive IB network who are crying out for a well known firm to come to South Africa and give them proper service.

Currently you have either IG or Plus500 – and they are not going to be interested in personal service – they want clicks and deposits, and CPA.

Food for thought indeed. Talking of food, I’m off to prepare for another wonderful South African tradition – marinading some of the world’s highest quality produce ready for a barbecue.

Wishing you all a super week ahead!






Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”