Forex Trading in Kenya: Regulation and Brokers
Kenya is one of the most populous countries in Eastern Africa. With over 53 million citizens, the country is also fast becoming a major hub for trading Forex, as the regulatory body there, the CMA and traditional brokers have begun to realize the potential of the markets. Here is all you need to know about the regulation in Kenya and the brokers that operate there:
The CMA and the regulatory framework it has created
The regulatory body in Kenya is called the Central Markets Authority (CMA). It regulates the markets in the country in their entirety – so it handles the regulation of its growing Forex markets as well. Prior to 2017, Kenya did not have a robust regulatory framework in place. This changed, and the CMA has introduced a number of measures which brokers, seeking to deal in the country, need to comply with.
First and foremost, to obtain a license, a company needs to prove it has what it takes to operate on the highly competitive Forex markets, without the possibility of it failing and taking its clients’ funds with it. To prove that, most regulatory bodies require companies to hold over a certain amount of capital – and the CMA is no different. A license there requires a company to prove it holds between 30 million and 50 million Kenyan Shillings, depending on the type of license. Companies that require a dealing license will have to acquire the more expensive license, which is worth about $500 000 at the time of writing. The cheaper license, reserved for non-dealing licensees, will still require them to hold about $300 000. This is a requirement that is quite high – it is almost on par with what brokers in the EU are required to hold – €730 000 to be issued a license.
Of course, there are more requirements in place. The companies need to provide the CMA with a detailed business plan, to prove they are operated by qualified individuals who are best qualified to handle client money. These assurances include a detailed set of documentation, outlining the board of directors of the company, an external audit, a short-term three year business plan and much more. More interesting, companies that have obtained a license are also required to hold a certain amount of liquid capital to be able to meet their operational costs. This has been determined to be at least 30 million Kenyan Shillings, or about $300 000 at the time of writing. Both dealing and non-dealing licensees will be required to hold this amount of money.
Overall, the regulations that are in place at the time of writing are quite strict and prove the CMA is taking a strict approach to overseeing the markets and proving not only the liquidity, but the transparency of the brokers at hand. This means that you will not only be sure who you are dealing with, but also what they can offer you! Compared to other major FX markets in Africa like Nigeria and South Africa, Kenya is really on the forefront of regulation at the time of writing.
However, the country’s regulation, strict as it may be at the time of writing, there are still measures that are excluded from its framework – for example, brokers that are licensed in the EU are required to maintain a Negative Balance Policy, which makes it impossible to lose more money than what one has invested with a brokerage. At the same time, these traditionally strict jurisdictions have other restrictions in place – there is a limit on the maximum leverage available in the EU of up to 1:30, and bonuses are outlawed. Kenya does not currently have such measures in place.
Here is a comparison between the regulatory frameworks of Kenya, less regulated African markets and the EU framework:
Local forex brokersWith this comparison in mind, it is easy to see that Kenya is a bit of a middle ground when it comes to regulation. The measures in the country are quire strict, and are aimed at proving the liquidity and transparency of brokers. The firms that deal there are therefore safe and transparent, but there are less protections in place when it comes to shielding the retail client from the volatility of the markets. Overall, Kenya is a market that is worth following, and the strict approach the CMA has taken has set it ahead of other states in Africa. We suspect the trend towards regulation will continue in the following years, helping build Kenya up as a reliable and reputable hub of Forex trading.
With the regulatory framework of the country thoroughly examined, we would now like to present you with some of the best companies that operate there – these Kenyan forex brokers are dully licensed with the CMA, but the majority of them hold other licenses as well. Here are the five best CMA-licensed brokers in no particular order:
Licensed under Pepperstone Markets Kenya Limited, this broker is a staple of Forex trading. It also holds licenses in Cyprus, Australia, Dubai and the United Kingdom. Therefore, trading with the broker is quite safe.
2. Exinity East Africa Limited
Exinity is the company behind a broker that hardly needs introduction – FXTM. This company has offices around the most of the world, and the recent Kenyan branch is the latest addition. This branch is licensed under Exinity East Africa Limited.
HFM, or HotForex, as it was previously known, is another large broker that is a mainstay on the markets. It holds licenses in Cyprus, the UK, Dubai and, as of late, Kenya. The Kenyan branch of the broker is registered with the CMA as HFM Investments Limited.
FXPesa is another broker that has obtained a license with the Kenyan regulatory body. The firm is also licensed in the UK and has good trading conditions to offer.
5. Scope Markets
Scope Markets has recently obtained a CMA license, with the broker being licensed under SCFM Limted. . The company is licensed in Kenya, but also in Belize, and is once again a good broker to trade with.