The Capital Markets Authority (CMA) has released new guidelines directing online foreign exchange brokers to enhance disclosure mechanisms, promote transparency and ensure investor protection. To mitigate the risks and losses associated with participating in Contract for Differences (CFDs), the CMA is working with the licensed forex brokers to ensure there are appropriate disclosures and rollout of a comprehensive investor education programme.
CMA said it is working with licensed brokerage community and other stakeholders to develop standards to protect consumers by ensuring integrity in CFD products to deliver satisfactory outcomes for all stakeholders.
A CFD is a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time. CFDs allow traders and investors an opportunity to profit from price movement without owning the underlying assets. The value of a CFD does not consider the asset’s underlying value, only the price change between the trade entry and exit.
“In an effort to foster and deepen growth in the online forex trading industry, CMA has facilitated setting up of a Technical Working Group comprising of the licensed online foreign trading brokers as well as other stakeholders including peer regulators to assess the state of the market and propose recommendations to mitigate the challenges faced by investors, traders and licensed players,” said CMA Chief Executive Officer, Mr. Wyckliffe Shamiah.
The CMA Chief Executive added that continued collaboration with peer regulators including the Central Bank of Kenya, the Communications Authority and the Financial Reporting Centre among others is key to protect Kenyans from unlicensed online foreign exchange brokers. CMA has so far licensed nine non-dealing online foreign exchange brokers and two money managers.
The non-dealing online foreign exchange brokers are; EGM Securities Limited (trading as FX Pesa); SCFM Limited (trading as Scope Markets); Pepperstone Markets Kenya Limited; Exinity Capital East Africa Limited; HFM Investments Limited (trading as HF Markets); Windsor Markets Kenya Limited; Tadenex Limited (Trading as Exness); Ingot Africa Limited; Admirals KE Limited. The money managers is Standard Investment Bank (trading as Mansa X) and Trade Sense Limited.