Next week, the TFB team will return to the South Africa Finance Magnates Summit in Cape Town. Leading up to the event, we wanted to do a deep dive into what we have noticed is happening in the market and what other industry experts are saying.
Retail brokerages in South Africa: Current trends
The South African (SA) market is not as developed and mature as the ones in the EU and North America, but it is also not as hyped as MENA or LATAM.
There is a lot of interest from both inside and outside the region in boosting the number of brokerages operating there and their trading volumes. Over the years, TFB has worked with local partners and clients, and we’ve seen many changes and transformations in the market.
We now see several trends shaping what the market will look like in the future.
- Retail trading is booming. According to BestTraders, the country’s currency has over 190K active traders who generate over $2 billion USD in volumes. There is a lot of interest in launching new brokerages and expanding the current offering, although the execution takes longer on average than in some other markets.
- Mobile-first focus is very noticeable. It is unclear whether it has to do with more people owning only smartphones or tablets, or the general shift in internet consumption away from laptops and PCs. Still, it’s undeniable that SA traders prefer mobile-friendly services and expect their brokers to provide an equally user-friendly experience as they would with a website.
- Regulations are simultaneously a threat and a beacon of hope. The local authority, FSCA, enforces a rather strict set of rules that must be followed. It may be hard to maintain for smaller brokers with limited resources, resulting in fewer of them making it to the market.
- Education is the top marketing strategy for many retail brokerages. With the SA market still relatively new, many traders are keen on learning the ins and outs of the process. Brokers who realise that, provide helpful how-to guides and educational webinars, as well as focus on posting valuable content, are winning traders’ hearts and volumes.
Most in-demand solutions for South African brokers
As a technology provider for retail brokers, TFB works with many retail brokerages of different sizes and focuses.
We see a distinctive set of products in South Africa that brokerages use and request.
#1 Liquidity bridge and execution engine
Trade Processor is by far the most in-demand product in the portfolio.
Local brokerages are particularly keen on multiplatform support, as many of them are either launching with a particular platform and looking to expand further once they grow, or struggle to acquire a MetaTrader license, and prefer to work with something else.
The built-in selection of risk management functionality is highly appreciated in the SA market. With many uncertainties and volatilities, brokers and traders want to feel safe knowing that the technology is working overtime to protect them.
Some of the tools available in the bridge for risk management include on-the-fly A/B-book Auto Switch that allow brokers to hedge risks and maximise profits; highly customisable order execution settings that ensure orders get executed with the best pricing possible regardless of nuances; and advanced monitoring and reporting that tracks all abnormalities, good or bad, and allows you to take timely action without being glued to your screens 24/7.
#2 While Label and Main Label packages
Starting a brokerage from scratch is both resource-intensive and time-consuming.
Many local brokers aren’t ready to wait a few months and instead, immediately provide a lump sum investment to start operating. They prefer to test the waters and launch immediately to confirm their hypothesis.
Main Label and White Label solutions allow them to be up and running in a matter of a few days, to spend significantly less money upfront, and to outsource all technical aspects to a knowledgeable partner so that they can focus on the business side of things.
#3 Prop trading
Prop trading is booming in Europe and Asia, but is still a relatively novel concept in the SA market.
The demand is growing, especially among retail brokers who choose this model along with a classic brokerage. Prop trading is known for attracting talented traders passionate about the craft and often producing above-average results, which is especially crucial for new companies. The focus on educational marketing pays off well here as brokers attract two types of clients with their helpful how-to guides, videos, and webinars. Amateur traders are eager to learn the basics, and prop traders are willing to expand their knowledge to leverage all the opportunities the brokerage provides.
At TFB, we offer a specific package for prop trading companies that pairs all the tech solutions by TFB with other software and systems provided by partners, creating a comprehensive package of solutions necessary to run a business.
#4 Credit Management application
The Credit Management application is a hit globally, and the SA market is no different.
There is a considerable demand for tools that can help brokers to attract new audiences and motivate clients to trade more, so it’s not a surprise that the Credit Management application is so popular in SA as it allows not only bonus campaigns to be run, but also to control its usage, protecting brokers and preventing bonus abuse strategies.
For instance, when a trader reaches a threshold level, their bonus will be withdrawn automatically to prevent traders from losing brokerage credit funds. With this being automated, brokers can reduce their risks, keep their teams small, and comply with regulatory requirements.
#5 Copy Trading plugin
Copy Trading tools are very popular in many markets. However, it’s even more in demand in markets where traders are afraid of starting trading by themselves, but don’t mind following someone more experienced.
The Copy Trading plugin allows you to copy trades from one account to another or even a group of accounts (followers), so brokers can create multiple chains of Source – Target accounts with an opportunity to copy trades with additional parameters applied (multipliers, reverse trading, etc.).
The tool is handy for beginner traders, and it only makes sense that the South African market, with many aspiring traders, regards the copy trading functionality as top priority.
At the same time, the Copy Trading tool would be invaluable for brokers who want to hedge only a part of their risk. For example, if they’re going to send only 50% of their volumes to a particular LP, it makes it an effective tool for risk management.
