As many of our clients will already be aware, market participants who currently and proactively, acting as principals, offer and issue over-the-counter (OTC) derivatives to South African clients / counterparties have until 28 January 2019 to lodge applications for authorisation as ODPs in terms of the regulations published under the Financial Markets Act, 2012 (FMA Regulations).

Despite some confusion in the market around whether foreign ODPs are required to lodge applications for authorisation, the Financial Sector Conduct Authority (FSCA) has expressly confirmed to us in writing that the FMA Regulations indeed apply to the proactive, cross-border activities of foreign ODPs that result in the foreign ODP meeting the definition of an “ODP”. In terms of the operational ability requirements imposed by the FMA Regulations, the FSCA has further confirmed that in terms of the requirement that ODPs have a fixed business address in South Africa, a foreign entity’s registration as an external company under section 23 of the Companies Act, 2008, will indeed meet this requirement.

In respect of lodging applications for authorisation generally, should an application be lodged by no later than 28 January 2019, the entity concerned will be permitted to continue to enter into OTC derivatives trades, proactively, with South African clients / counterparties, regardless of how long it may take for the entity’s ODP authorisation to actually be granted.