Online forex trading firms have built assets worth Kes1.8 billion since the Capital Markets Authority started licensing the companies in 2018.
CMA-licensed four non-dealing online foreign exchange brokers including: EGM Securities Limited (trading as “FXPesa”), SCFM Limited (trading as “Scope Markets”), Pepperstone Markets Kenya Limited and Exinity East Africa Limited.
According to the regulator Capital Market Soundness Report for the nine months to September, the online forex dealers held assets worth Kes1.8 billion and liabilities to the tune of Kes1.2 billion.
Now the regulator has granted licenses to HFM Investments Limited and Windsor Markets (Kenya) Limited to operate as non-dealing Online Foreign Exchange Trading brokers, lifting the number of entities in this space to six.
The fast growth in the business have seen the forex dealers surpass investment advisors who have assets worth Kes1.5 billion.
The biggest business currently is in investment banking, who hold assets of Kes12.6 billion and fund managers whose assets count Kes6.5 billion.
Stock brokers have assets worth Kes2.2 billion according to CMA.
Online forex trading is growing rapidly in Kenya ever since issued the Capital Markets Act, Cap 485A and the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017 and started issuing licenses to businesses.
Online forex offers high returns, usually on very risky business including online forex trading, commodities such as oil, stocks in foreign capital markets, precious metals, cash and hedging with derivatives.
Kenyans are increasingly gaining knowledge of opportunities abroad whose returns surpass the traditional asset classes like land speculation, stocks and government bonds.
Foreign firms are setting up subsidiaries locally to provide access to foreign markets effectively opening a new frontier for investors and local brokers.
As non-dealing online foreign exchange brokers, the entities are licensed by the authority 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 regulator expects the brokers to deal only with sophisticated clients, choose and manage investments prudently for its online forex trading clients and develop appropriate investment strategies to hedge for losses.
The regulator also expects to brokers to communicate clients’ buy and sell order positions through a to meet clients’ investment goals.