CMA licenses second non-dealing online forex trading broker
Nairobi, 13 May 2019…The Board of the Capital Markets Authority (CMA) has approved the grant of a license to SCFM Limited to operate as a Non – Dealing Online Foreign Exchange Broker in line with the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017.
The non-dealing online foreign exchange broker license means the entity is 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 and does not engage in market-making activities (buying and selling of foreign currencies).
This is the second non-dealing online foreign exchange broker license to be issued under the new regulations, which brought the oversight of online foreign exchange brokerage services under CMA. The first license was issued to EGM Securities Limited in 2018.
Non-dealing Online Forex Brokers avail a trading platform to clients to enable them trade from anywhere and at any time using their electronic devices. The platform provides access to global markets and also provides an opportunity to clients to educate themselves on the global financial markets. Non- dealing Online Forex brokers do not offer client advice or trade on behalf of their clients. Clients deposit their investment amount with an account to be offered by the broker. The trader (client) is responsible for executing trades – buying and selling of any products on the platform and the requisite risk assessments are undertaken to determine suitability of clients to participate in online forex trading.
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. When opening a FX & CFD account, an investor agrees to exchange the difference between the opening price and the closing price of the FX or CFD position with the Broker. One does not acquire ownership of the underlying asset when taking a long (buy) position nor are is one required to deliver the underlying asset when taking a short (sell) position. CFDs offer a simple method to speculate on different markets without owning the underlying asset on which the contract is based. This is different from Forex Bureau business where parties actually hold the foreign currencies being exchanged based on spot exchange rates.
SCFM Limited is a fully owned subsidiary of SM Capital Markets Limited which is a company registered in Cyprus. SM Capital Markets also has another subsidiary, Scope Markets which is registered in Belize.
SM Capital Markets Limited is authorized and regulated by Cyprus Securities and Exchange Commission with a cross border license to offer investment services internationally. SM Capital Markets has given a capital injection to SCFM Limited to cover the non-dealing online foreign exchange broker license’s paid up capital.
BACKROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY
The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence.
The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact: Antony Mwangi, Head of Corporate Communications on