The Capital Markets Authority of Kenya has drafted rules aimed at regulating the online forex trading activities undertaken by individuals/companies in the country. In a notice on the local dailies, the authority says that there are currently no regulatory framework prohibiting nor guiding online forex trading in Kenya with unverified statistics indicating that over 50,000 Kenyans are participating in this market using foreign registered brokers.
“The fact that there are no legal provisions to inform registration and supervision of online forex brokers explains the current absence of online brokers in Kenya. The National Treasury has so far received enquiries from 2 potential online brokers intending to establish retail brokerage firms in Kenya.” reads part of the notice.
CMA argues that a legal framework for the online trading of currencies will aid in ensuring potential traders have a safer trading environment, facilitate diversification of financial activities and will serve to strengthen Nairobi’s position as a financial hub.
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“It is with this background that the Cabinet Secretary, National Treasury has proposed to introduce facilitative amendments to the Capital Markets Act, through the Finance Bill, 2016, in order to facilitate the emergence of an effective and secure online forex trading environment for Kenyans. The draft Capital Markets (Licensing Requirements for Online Forex Brokers and Conduct of Online Forex Business) Regulations, 2016 seek to provide the requisite regulatory framework to safeguard effective and secure online forex trading by fostering investor protection, integrity, fairness, market confidence and proper conduct by forex brokers.” Reads the notice.
Below we have listed a summary of some of the key recommendations
1. An online forex broker regulated in another jurisdiction shall produce a letter from that other foreign online forex broker evidencing the existence of such relationship and legal documents, including a copy of their agreement. The broker will also be required to produce a letter from the regulator from that other jurisdiction confirming that the online forex broker is licensed.
2. All forex brokers are expected to maintain minimum financial requirements to help protect clients and market participants. Minimum paid up capital of Ksh 50 million is recommended, and if its a foreign broker this shall be maintained in Kenya at all times.
3. All banks intending to provide online forex trading services will secure a no objection of Central Bank of Kenya as the primary regulator
Regulations to be applied in retail forex trading will focuses on forex brokers and not on the forex retail traders. The draft is available on the authority’s website for the public comments.