JP Markets, once the largest contracts for differences (CFDs) broker in South Africa, is making a comeback, aiming to relaunch operations by the end of September, Finance Magnates learned exclusively.

JP Markets Received an ODP License

The services will be offered under an Over-the-Counter Derivatives Provider (ODP) license, which the broker received from South Africa’s Financial Sector Conduct Authority (FSCA) on 11 July 2023, according to the official documents.

“The ODP license is a highly regulated and sought-after license in South Africa,” Justin Paulsen, the Founder of JP Markets, told Finance Magnates. “There are only a few companies who are approved to operate as an ODP. The license requirements include, but not limited to, stringent capital adequacy reserves, several risk and compliance functions, strong corporate governance principles.”

“Other regulations refer to the ODP license as a market-making license, allowing the ODP to be the counterparty to trades. This allows the ODP to increase the various services and offerings that can be offered to clients, including B2B services.”

Rise, Fall, and Comeback

Established in 2016, JP Markets has a rollercoaster journey. The broker had about 400,000 registered clients with 15,000 daily active traders, based on the company’s numbers. It processed approximately ZAR 500 million in deposits per month at its peak.

The company was also profitable, generating a gross profit of over ZAR 100 million annually.

However, the broker’s dominance collapsed in mid-2020 as the FSCA temporarily suspended its license, citing a persistent issue in processing clients’ withdrawals. A High Court order of liquidation of the broker followed the regulatory action.

JP Markets moved to South Africa’s Supreme Court against the liquidation order and received relief. The apex court overturned the lower court order of liquidation and directed the regulator to pay the legal costs of the hearings to the brokerage.

Additionally, the Supreme Court ruling said that the broker did not make its services obscure, did not possess systematic risks to clients and financial markets, and had no conflict of interest in dealings.

Previously, JP Markets operated with an FAIS license (Financial Advisory and Intermediary Services), similar to an STP license. It allowed the broker to act as an STP broker and hedge their risk with a liquidity provider or other broker.

Relaunching Services

Under the new ODP license, JP Markets will continue to offer CFDs trading services with multiple asset classes to retail clients. It will also focus on launching a copy trading system. Further, the scope of the license will allow the broker to explore offering B2B services.

However, despite the apex court’s acquittal, it might be challenging for the broker to dominate the South African CFDs market again, given the competitive nature of the industry.

Vantage and Admirals are two established CFDs brokers that have received South African licenses in the last year. eToro also started to onboard South African traders last year but under a UK license.

Paulsen explained that after the three-year gap, the broker will run “PR campaigns to rehabilitate the brand, [along with] new first-of-its-kind offices, active marketing strategies, and growing Introducing Brokers (IB) base and ultimately forming a community.”

The broker is also looking to expand beyond the South African markets and establish a presence across the continent.

“JP Markets SA will be rapidly expanding its operations across Africa after the relaunch,” Paulsen added. “We have already formed important and key partners within other African countries and submitted license applications within other jurisdictions to ensure that we again become one of Africa’s biggest brokers.”