CFD Trading in South Africa 2024 | Tutorial and List of Top Brokers (2024)

CFD trading in South Africa has become increasingly popular. In fact, CFDs are challenging single stock futures in terms of activity on the Johannesburg Stock Exchange (JSE). This means there is a growing number of firms and platforms for traders to choose from. Here we’ll run through some of the best, as well as explaining the tax implications of CFD trading in South Africa.

See all CFD Brokers in South Africa

How Does CFD Trading Work?

Firstly, what are CFDs and how do they work? A CFD, which stands for contract for difference, is a tradable derivative instrument that allows speculation on the price movement of an asset without owning the underlying security. CFDs are available on stock market indices, forex, commodities, cryptocurrencies, futures, options, and more.

For further guidance on day trading CFDs, including strategies, see here.

Is CFD Trading Legal In South Africa?

CFD trading is legal in South Africa. The country’s Financial Services Board (FSB) oversees CFD and forex trading. In addition, many established companies dealing CFDs in South Africa are regulated by other reputable bodies, including the Cyprus Securities and Exchange Commission (CySEC) and the UK Financial Conduct Authority (FCA). As a result, traders in South Africa could benefit from the legal protection of several trusted bodies.

CFDs Vs Single Stock Futures

Single stock futures (SSFs) contracts are similar to CFDs and hugely popular in South Africa. With that said, there are some important distinctions. Firstly, CFDs do not expire, whereas single stock futures do and they incur a rollover fee if you still hold them at expiry. With CFD investments you get one CFD per contract, single stock futures on the other hand, are 100 shares per contract. Also, equity CFDs do not incur dividend exposure, unlike single stock futures.

How to Choose a Brokerage

The best CFD trading brokerages in South Africa offer competitive fees, an easy account opening process, and an intuitive platform. XTB is a particularly popular option among traders in South Africa – promising low CFD stock fees, plus prompt deposits and withdrawals. Another prominent player in South Africa is XM, which offers a simple market maker account, a direct market access account, and a hybrid option. City Index and IG also offer competitive fees, excellent educational tools, and a social trading environment.

To help you sift through the many options, we’ve listed the best CFD trading firmshere.

Platforms

There are multiple platforms suitable for online CFD trading in South Africa. MetaTrader (MT4) currently defines the market. But other popular software options include L2 Dealer and ProRealTime. Which one is best will depend on the trading strategies used.

When picking an online platform, traders should look for:

• A fast and easy to learn platform
• A powerful mobile app for mobile traders
• Sophisticated charting and pattern analysis
• Positive customer reviews from other traders
• Comprehensive risk management alerts and tools

Tax

Before you open an account, you should understand how CFD taxes work in South Africa. The South African Revenue Service (SARS) treat profits from CFD trading as gross income, meaning tax may be payable under the Income Tax Act. Note expenses can be deducted from gross income. Keeping a detailed record of trades will help make declaring profits on annual tax returns more straightforward.

For more information on day trading taxes, see here.

Education

For beginners and experienced CFD traders in South Africa, there are excellent resources available. The Johannesburg Stock Exchange and the Standard Bank of South Africa have both published useful PDFs that explore how CFDs work, including definitions and trading strategies. Traders looking for a more immersive learning environment than PDFs can also sign up for online courses that show how to trade CFDs successfully, using real-life examples.

Final Word

CFD trading in South Africa is legal and popular among retail investors. There are many reputable domestic brokerages and platforms on the market. Alternatively, traders can sign up to international firms and access CFDs on markets in South Africa, including stocks, shares, and commodity trading.

FAQ

Is CFD trading legal in South Africa?

CFD trading is legal in South Africa. The Financial Services Board (FSB) regulates the CFD market. Traders should ensure they choose a broker that holds a license with the FSB or another trusted regulatory body, such as the UK Financial Conduct Authority (FCA) or the Australian Securities and Investments Commission(ASIC).

Is CFD trading in South Africa safe?

CFD trading in South Africa does come with risks. The main concern is around brokers lending traders capital in return for a small deposit, known as margin, allowing traders to increase their position size. Whilst this may mean greater returns, it can seriously increase potential losses.

How much money do I need to trade CFDs?

Although minimum deposits vary between brokers, CFD accounts can be opened with a few thousand South African Rand. Account types vary, but usually the more you deposit, the more competitive the leverage options, fees, and the trading tools available.

What is the best CFD trading platform?

The best CFD trading platform is open to interpretation. MetaTrader (MT4) is the most widely used, but there are other good options. The trick is finding a system that’s reliable, user friendly, and home to all the charts and analysis tools your strategy requires.

Is CFD trading a con?

CFDs are a legitimate financial product. CFD trading brokers and exchanges are regulated by reputable bodies around the world, including the South African Financial Services Board (FSB) and the UK Financial Conduct Authority (FCA).

Recommended Reading