Africa Around the World Business

Kenya licences first online forex broker

(BusinessToday)–   The Capital Markets Authority (CMA) has licensed Execution Point Ltd to operate as an online foreign exchange broker, becoming the first such company in Kenya. This is line with the Capital Markets (Online Foreign Exchange Trading) Regulations, 2017 which came into effect last year.

Execution Point is a local subsidiary of British firm Davisa UK Limited. The non-dealing online foreign exchange broker licence means the entity will act as a link between the foreign exchange market and clients 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 first license to be issued under the new regulations, which brought the oversight of online foreign exchange brokerage services under CMA, which includes supervision of licensed entities.

Non-dealing Online Forex Brokers provide a trading platform to their clients that enables the clients to trade from anywhere and at any time using their electronic devices. The platform provides access to global markets and also forums for 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.

Source:: Businesstoday-Kenya

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