The Capital Markets Authority (CMA) has granted a licence to SCFM Ltd to operate as a non-dealer online foreign exchange broker, making it the second firm to attain this status.
SCFM is a wholly-owned subsidiary of Cyprus-registered SM Capital Markets, which also has another subsidiary, Scope Markets, registered in Belize.
The firm will join EGM Securities, licensed last year, in linking clients with online foreign exchange markets at a commission. This does not extend to the two companies buying and selling foreign currencies.
SM Capital Markets has given a capital injection to SCFM to cover the paid up capital, according to the CMA.
It comes at a time the regulator has increasingly warning the public of the risk of losing investments by trading via online foreign exchange brokers or money managers that have no CMA accreditation.
Non-dealing online forex brokers offer a trading platform with access to global markets that allows clients to trade easily in any currency using electronic devices.
Clients deposit investment amounts in an account offered by the broker and execute trades by themselves. Traders need in the upwards of $100 (Sh10,100) to start trading in global currencies via platforms such as that of EGM, with payments made through digital financial services.
Forex trading is based on speculation of one currency price against another and is governed by CMA’s Online Foreign Exchange Trading regulations of 2017.
It is an example of a Contract for Difference (CFD), which is 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.