Kenya’s financial regulator to bring Forex broker regulation home


The African country of Kenya’s financial regulator Capital Markets Authority (CMA) today has published draft ‘Capital Markets Licensing Requirements’ for ‘Online Forex Brokers and Conduct of Online Forex Business Regulations 2016’ to provide the requisite regulatory framework to safeguard effective and secure online forex trading in Kenya.

A couple of years ago we reported on LeapRate, professionals within the FX market operating out of Kenya begging to get regulated. The major reason being in order to clear up grey areas which exist between international jurisdictions in regulating the sector. Kenya’s financial infrastructure has been maturing rapidly as the country planned to launch its first futures exchange in 2014. To that end, it’s a positive sign that finally the CMA is moving to protect Kenyan traders by providing clear laws and rules within their home jurisdiction.

Nairobi has been rated the top African city in access to formal financial services, catapulting it into the top 10 cities in economic growth potential.
Nairobi has been rated the top African city in access to formal financial services, catapulting it into the top 10 cities in economic growth potential.

In the new draft regulations, online forex brokers will be required to have a minimum capital of Sh50 million (roughly $500,000 USD).

The brokers will also be expected to maintain the minimum capital at all times and to ensure that Sh40 million or 80 percent of its capital is in form of cash and cash equivalents in financial instruments at all times.

The new measures are intended to foster investor protection, integrity, fairness, market confidence and proper conduct by forex brokers.

According to Standard Investment Bank Research, over 50,000 Kenyan investors are participating in online forex trading through foreign registered brokers who link through the internet to access the highly liquid currency clearing centres in the USA, Europe, Japan and other countries.

“Providing a legal framework for the online trading of foreign currency is expected to aid in ensuring potential traders have a safer trading environment, facilitates diversification of financial activities and serves to strengthen Nairobi’s position as a financial hub,” the research firm indicated.

Deadline for submission of comments on the new regulations is August 17, 2016.

Treasury Cabinet Secretary Henry Rotich through the Finance Bill 2016, proposed to introduce an amendment to the Capital Markets Act to regulate this business.

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Kenya's financial regulator to bring Forex broker regulation home

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