Kenya is one of the most populous countries in East Africa. With a population of over 53 million, the country is also fast becoming a major hub for forex trading as its regulator, CMA and traditional brokers have begun to see the markets potential. Here is everything you need to know about regulation in Kenya and the brokers operating there:
The CMA and the regulatory framework it created
The regulator in Kenya is called the Central Markets Authority (CMA). It regulates the country’s markets as a whole – so it also takes care of regulating its growing Forex markets. Prior to 2017, Kenya did not have a solid legal framework. This has changed and the CMA has introduced a number of measures that brokers wishing to trade in the country must comply with.
In order to get a license, a company must first and foremost prove that it has what it takes to operate in the highly competitive Forex markets without failing and taking its clients’ funds with them. To prove this, most regulators require companies to hold a certain amount of capital – and the CMA is no different. For a license there, a company must prove that it holds between 30 and 50 million Kenyan shillings, depending on the type of license. Businesses that require a commercial license will need to purchase the more expensive license, which is worth around $500,000 at the time of writing. The cheaper license, reserved for non-dealing licensees, still requires them to hold around $300,000. This is quite a high requirement – it’s almost the same as what brokers are required to hold in the EU – €730,000 to be issued a licence.
Of course there are other requirements. Businesses must submit a detailed business plan to the CMA to demonstrate that they are operated by qualified individuals who are best qualified to handle client funds. These assurances include detailed documentation outlining the company’s board of directors, an external audit, a three-year short-term business plan and more. What’s more interesting is that companies that have received a license must also hold a certain amount of liquid capital to be able to cover their operating costs. This has been set at a minimum of 30 million Kenyan shillings or around $300,000 at the time of writing. Both commercial and non-commercial licensees must hold this amount of money.
Overall, the regulations in place at the time of writing are quite strict, proving that the CMA takes a rigorous approach to monitoring the markets and proving not only the liquidity but also the transparency of the brokers in place. So you not only know who you are dealing with, but also what he has to offer you! Compared to other major FX markets in Africa like Nigeria and South Africa, Kenya is really at the forefront of regulation at the time of writing.
The country’s regulation, however strict it may be at the time of writing, still has measures that are exempt from its framework – for example, brokers licensed in the EU must maintain a negative balance policy, making it impossible to lose more money than you have invested with a broker. At the same time, there are other restrictions in these traditionally strict jurisdictions – there is a limit on the maximum available leverage in the EU of up to 1:30, and bonuses are prohibited. Kenya does not currently have such measures in place.
Local forex brokers
In this comparison, it is easy to see that Kenya is somewhere in the middle when it comes to regulation. The measures in the country are very strict and aimed at demonstrating the liquidity and transparency of brokers. The firms that trade there are therefore safe and transparent, but there is less protection when it comes to protecting the retail investor from the volatility of the markets. Overall, Kenya is a market worth pursuing and the rigorous approach the CMA takes has put it ahead of other states in Africa. We suspect that the trend towards regulation will continue in the years to come and will help make Kenya a reliable and respected center for forex trading.
Having thoroughly examined the country’s regulatory framework, we would now like to introduce you to some of the best companies operating there – these Kenyan Forex brokers are duly licensed by the CMA, but most of them hold other licenses as well. Here are the top five CMA licensed brokers, in no particular order:
1. Pepper Stone
Licensed under Pepperstone Markets Kenya Limited, this broker is a forex trading staple. 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 needs little introduction – FXTM. This company has offices around the world and the most recent office in Kenya is the newest addition. This branch is licensed under Exinity East Africa Limited.
HFM or HotForex as it used to be called is another major broker that is a mainstay in the markets. It holds licenses in Cyprus, UK, Dubai and more recently in Kenya. The broker’s Kenya branch is registered with the CMA as HFM Investments Limited.
FXPesa is another broker that has received a license from the Kenya regulator. The company is also licensed in the UK and offers good trading conditions.
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.