The Kenyan Treasury, led by Cabinet Secretary Njuguna Ndung’u, has implemented regulatory changes affecting online forex brokers, introducing an annual fee to be remitted to the Capital Market Authority (CMA). The move aims to enhance regulatory revenue streams and foster investor protection in the online forex trading industry.
Annual Fee Requirement: Online forex brokers, both dealing and non-dealing, are now obligated to pay an annual fee to the CMA. The fee is determined based on the gross trading revenue, inclusive of commissions and rebates from third-party service providers. The rate specifics are outlined in the Third Schedule of the amended Capital Markets (Online Forex Exchange Trading) Regulations, 2017.
Three Percent Fee Structure: The introduced fee structure mandates that online forex brokers remit an annual three percent fee to the CMA. This fee is calculated on their gross revenue, covering commissions and rebates, contributing to the regulator’s financial resources.
Dealing and Non-Dealing Brokers Distinction: Dealing forex brokers, acting as market makers, set bid and ask prices and profit from buying at lower prices and selling at higher prices. Non-dealing brokers collaborate with liquidity providers, offering variable spreads and matching traders. The fee imposition applies to both categories.
Investor Protection Initiatives: The regulatory changes align with CMA’s efforts to enhance investor protection in the forex trading sector. The authority has established a working group, including licensed forex brokers and stakeholders, to develop standards ensuring appropriate disclosures and comprehensive investor education.
Mitigating Risks in CFD Investments: The regulatory review also focuses on mitigating risks and losses associated with Contract for Differences (CFDs) products. CFDs involve contracts between buyers and sellers, and CMA seeks to establish guidelines to safeguard investors engaging in this type of financial instrument.
Technical Working Group: CMA has facilitated the creation of a Technical Working Group comprising licensed online forex trading brokers and relevant stakeholders. This group aims to assess the industry’s current state, propose recommendations, and address challenges faced by investors, traders, and licensed players.
Summary: The Kenyan Treasury’s introduction of an annual regulatory fee on online forex brokers, coupled with enhanced investor protection initiatives by the CMA, reflects a commitment to fostering a secure and thriving online forex trading industry. The regulatory changes aim to strengthen financial resources for the authority while establishing standards to safeguard investors and mitigate risks associated with CFD investments.