FX Brokers with New Licenses in 2023: Capture the Market Potential and Advance on MEA!

In 2023, the global foreign exchange (FX) market size reached USD805 billion, according to IMARC Group. The market size is expected to reach USD1,466 billion by 2032, representing a growth rate (CAGR) of 6.92% during 2024-2032. For business expansion, licenses are very important for FX brokers, which is undeniable. Obtaining a FX license can prove the legality and credibility of a broker, increase customer trust, and enable them to tap into new markets, thus expanding their market share and revenue.

In 2023, Fazzaco covered the stories of 18 FX brokers which secured a total of 20 new licenses around the globe. In this article let's explore where these brokers acquired new licenses, and what market trends they reveal last year.

Based on Fazzaco's data, the most read stories are: in early 2023, Plus500, the global leader in online CFD trading, has been granted a license from the Dubai Financial Services Authority (DFSA); in mid-2023, the global FX and CFD broker Zenfinex has become the first company in its industry to secure a permanent licence for trading CFDs in Sierra Leone; and ATFX, a leading global brokerage group, has received the Arrangement and Advice license from the UAE Securities and Commodities Authority (SCA), and in late 2023 it entered South Africa via the acquisition of a licensed Over-the-Counter Derivative Provider in the country, Khwezi Financial Services.

Where Did These 18 Brokers Obtain New Licenses in 2023?

As seen from the chart above, around six in ten FX brokers secured new licenses from jurisdictions in the Middle East and Africa (MEA). This result mirrors Fazzaco's findings from its 2022 series​, indicating a strong momentum in 2023 within MEA compared with a decline in Europe.

What Makes the Middle East and Africa So Popular with FX Brokers?

• Middle East

Rich in oil and gas resources, the Middle East is a key player in the global energy market. FX brokers can provide relevant financial products and services to meet the needs of investors in the region who are concerned about and want to benefit from energy price fluctuations.

Middle East economies boast varied levels of development and openness in financial sectors, some countries such as the UAE and Saudi Arabia have established a relatively sound financial regulatory system though. The most impressive performer in the region is UAE, which has attracted major players in the FX industry in 2023 including Plus500, M4Markets, eToro, Moneta Markets, ATFX​, etc.

Positive policy and economic gains were achieved last year in UAE. The country issued new Free Zone decisions for the purpose of UAE Corporate Tax law, providing clarity on the interpretations of Qualifying and Excluded Activities. Besides, the DFSA took a significant step by adopting, alongside other financial regulators of the UAE, the Principles for the effective management of climate-related financial risks.

In the first half of 2023, the UAE's GDP expanded by more than 3%, with non-oil sectors composing over 70%. The World Bank anticipates the country's GDP to rise 4.1% for full-year 2023. Despite a global FDI inflow decrease of 18% in 2023, new foreign investment projects in UAE rose considerably by 28%, second only to the United States.

Moreover, Dubai has grown into one of the world’s most dynamic financial markets, with over 300k investors opting to conduct business there. In the next decade, this growth is projected to fuel the local economy to reach 32 trillion dirhams, making Dubai among the fastest growing cities globally.

• ​Africa

Let's turn our attention to Africa. The region has great economic growth potential and is considered the last undeveloped market in the world, with a huge population dividend (over 1.4 billion people) and consumer demand. Companies from all walks of life are scrambling to seize the last “billion-level blue ocean market” on the planet.

African economies remain resilient. African Development Bank Group previously forecast the real GDP growth of the continent is set to come in at 3.4%, compared to 4% in 2022, as a result of political instability, weak global growth and high interest rates. 

Financial regulations in Africa, characterized by relaxed rules on leverage and binary options, grants FX brokers considerable freedom and flexibility, with substantial earning potential. Furthermore, the small presence of such firms in the market makes it easier to gain a significant foothold.

In 2023, South Africa emerged as a magnet for FX brokers such as ATFX, Vantage, Fxview's Finvasia. This is attributed to its refined financial oversight which fosters safer investment environment for investors. In July, the country required crypto exchanges in the region to be licensed by the end of 2023 for continued operation. This measure fortifies legal protections and bolsters investor confidence.

South Africa's economy in 2023, however, was one of the weakest in Africa, with a very low or negative GDP growth rate, high inflation, and high unemployment. 

Political and Economic Volatility Shapes FX Market in MEA.

Nevertheless, MEA grapples with political and economic uncertainties, pervasive conflicts, which often impact FX market stability and undermine market confidence.

In December 2023, the International Monetary Fund (IMF) slashed its forecast for Middle East, due the conflict in Gaza and Israel. The IMF noted that the conflict also spread to the Middle East and North Africa region. The uncertainty of the situation has gradually eroded the confidence of consumers and businesses, affecting investment and trading decisions, and may lead to a drop in spending and investment.

Additionally, the underdeveloped infrastructure in Africa compromises trading efficiency and security. Therefore, it makes FX brokers’ job to ensure smooth trading and capital security costly.

Wrap up

The political and economic environment, laws and regulations of different countries vary, and choosing the destination where to launch business is one of the key factors for the success of an FX broker. The market potential of MEA is compelling, but brokers should not ignore the potential downside risks in the region when considering expansion. We look forward to further growth of the FX industry in the region, injecting more vitality into the global financial market. Fazzaco will stay tuned on this topic and provide you with the latest information.