Online Forex Brokers business in Kenya is regulated by The Capital Markets Authority (CMA). The authority was established in 1989 as the state’s financial market regulator.
Here is what you need to engage in the forex brokerage business in Kenya.
Obtain a License
To engage in forex business activity in Kenya, you are required to obtain the relevant license from Capital Markets Authority.
CMA is responsible for monitoring, licensing, and supervising the activities of market intermediaries in Kenya. It is an autonomous financial regulatory agency of the Government.
Traders are assured of the safety of their funds by trading with brokers regulated by CMA. Protection is assured in case of a dispute with a regulated broker. Traders also get local supervision for fair trading practices/conditions by the Brokers.
Recently, CMA cautioned Kenyans regarding online Forex trading through unregulated platforms. The regulatory authority stressed to citizens that they are at risk of loss of their investments.
In 2017, the Capital Markets Authority (CMA) came up with regulations to regulate the forex industry in Kenya. Among its regulations is the requirement that forex brokers operating in the country need to get a license from the regulatory authority.
The regulations made it an offense for a forex broker to accept Kenyan retail traders if the broker does not hold a valid license from CMA. However, it is not until recently that the body started enforcing the regulations.
The enforcement has seen good and reputable foreign brokers exit the Kenyan market. The anticipated mass exodus of CMA-unregulated forex brokers has led most traders to work with only forex brokers regulated by Capital Markets Authority.
A forex broker who is not regulated by the Capital Markets Authority is regarded as illegally trading and can be charged with fraud.
The standards for compliance for all Forex brokers offering services to Kenyans have been defined by the CMA. They include being licensed and registered with the Authority, undergoing regular audits and communicating specific changes of service to their clients.
Licensed Forex Brokers in Kenya are also subject to evaluations and review by Capital Markets Authority. This is to ensure compliance with industry norms.
It helps in ensuring that currency trading is fair and ethical to all parties involved. Thus, a trader trading with CMA-regulated brokers is cushioned from scams.
The CMA updates a List of Licensees” on its website after every few weeks. Also, whenever CMA approves a new broker, they issue a press release on their website.
Here is what you need to do to obtain a forex brokerage license in Kenya.
To be licensed as a forex broker in Kenya, you need to be a limited share company, have a minimum capital of 30 million Kenyan shillings (about $300,000), and maintain a minimum capital of liabilities to clients plus five percent. In addition, 80% of the capital must be in cash or cash equivalents.
Foreign dealers wishing to trade in Kenya will also be required to maintain an equivalent of 40 million Kenya Shilling or $400 000 of their capital reserves in financial instruments in Kenya.
The new regulations also impose a leverage restriction – the maximum leverage allowed with forex transactions is capped at 1:20.
The forex brokerage business in Kenya is on an upward trend thanks to the internet and smart phone penetration. Kenyans from all walks of life are embracing online forex trading thereby creating huge opportunities for investors in this space.