The Central Bank of Kenya (CBK) has issued a notice warning Kenyans against using unlicensed online forex dealers.
The regulator has said that these forex dealers are unregulated and unlicensed and Kenyans risk being conned if they use them to trade currencies. According to them, these unlicensed brokers offer their services online through apps on the Google Playstore and on the Apple Store.
Forex trading (FX) is the speculation of one currency price against another currency. It is an example of a Contract for Difference (CFD) which is defined as an agreement to exchange the difference in the value of an asset from the time the contract is opened and when the contract is closed.
Forex trading has been increasingly popular with Kenyans with various platforms and players springing up. In Kenya, forex trading is regulated by Capital Markets Authority (CMA). In October 2018, CMA also warned Kenyans against trading in forex through unlicensed brokers.
There are only two licensed forex trading brokers in Kenya. The first license was issued to EGM Securities Limited in 2018. In May 2019, CMA granted SCFM Limited a license to operate as a Non – Dealing Online Foreign Exchange Broker in line with the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017. SCFM Limited is a fully owned subsidiary of SM Capital Markets Limited which is a company registered in Cyprus.
The non-dealing online foreign exchange broker license means the two companies are licensed by CMA to act as a link between the online foreign exchange market and a client in return for a commission or mark-up in spreads. The companies do not engage in market-making activities i.e. buying and selling of foreign currencies. The forex trading takes place on an online platform which provides access to global markets. The non dealing Online Forex brokers do not offer client advice or trade on behalf of their clients but they do educate customers on how to trade.
Customers deposit their investment via accounts on the trading platforms. EGM Securities offers customers the ability to top up their accounts via Safaricom Mpesa. The customers then buy and sell forex as they see fit.