Kenya’s online currency traders are now required to obtain a
licence from the Capital Markets Authority, (CMA) to continue in the
business following the recent enactment of tough regulations governing
the market.
The CMA, which is the capital markets
regulator, estimates that about 50,000 people, including brokers,
dealers and money managers, are in the business and are mainly using
offshore platforms that are not overseen by Kenyan regulators to offer
the service.
Luke Ombara, the regulatory policy and
strategy director at CMA, said the new regulations now require the
traders to register with the CMA as part of efforts to exert a measure
of regulatory control over online forex business.
To be registered, the forex dealers must raise Sh50 million in minimum capital, a requirement aimed at protecting consumers.
“An
applicant seeking a licence as an online forex broker shall be a
company limited by shares, have a minimum capital of Sh50 million, make
an undertaking to maintain the minimum capital at all times plus five
per cent of liabilities owed to forex customers in excess of Sh50
million and ensure that Sh40 million or 80 per cent of its capital,
whichever is higher, is in the form of cash and cash equivalents in
financial instruments at all times,” the regulations say.
Foreign
dealers wishing to trade in Kenya will also be required to maintain an
equivalent of Sh40 million of their capital reserves in financial
instruments in Kenya.
The Capital Markets (Online
Foreign Exchange Trading) Regulations, 2017 are contained in newly
gazetted amendments to the Capital Markets Act.
“I believe these (new rules) were an inevitable development. The
reason it was inevitable is that if we are serious about a derivatives
market we needed to onshore this component,” independent analyst
Aly-Khan Satchu said of the new rules.
Online trading
of foreign currency has become a prime investment avenue that Internet
savvy Kenyans are using to make money while in the comfort of their
homes or offices.
Growth of the business is being
fuelled by the mushrooming of online forex bureaus that offer trading
platforms from what has until now been a grey area of regulation.
Online
forex trading involves taking a position with regard to a particular
currency and trading it through the Internet, with the basic aim of
buying low and selling high.
Kenya’s
online forex traders are participating in the global currency market
through foreign registered brokers who provide the link to clearing
centres in Europe, Asia and the US.
Currencies are
traded in pairs. For example, a trader can take a position on the
movement of the Euro against the US dollar or the dollar against the
yen.
Mr
Ombara said the new regulations are meant to ensure orderly, fair and
transparent online forex trading, besides allowing more information to
participants – including prior warning on the level of risk that comes
with investing in such products.
“Many players have
been waiting to get a licence. We expect more interest especially from
global forex brokers and traders. We also expect less investor
complaints and greater financial deepening,” said Mr Ombara.
To
further reduce the risk factor in the business, the regulations cap the
leverage a broker may offer to a client at 10 times their deposit in
case of trades pairing the Kenyan shilling and hard currencies, and 20
times of deposit when pairing two hard currencies.
No comments :
Post a Comment