Effective regulation and enforcement will weed out fraudsters in the country’s fast-growing online forex trading market and instil confidence in the sector, London-based chief market analyst for global online trader Scope Markets has said.
He said regulators, however, need to balance out between regulation and stifling growth.
“Fraud is a big challenge all over the world in this space but the existing regulation will help deal with this,” said Mr Hughes.
“We are closely working with the CMA to ensure we enhance awareness and see the market grow.”
In 2017, new rules took effect requiring Kenya’s online currency traders to obtain a licence from the Capital Markets Authority (CMA).
Sources, however, said many rogue firms have refused to seek licences exposing users.
The CMA has also allowed the setting up of regulated entities within the foreign exchange trading space such as brokers and money managers.
The regulator has so far issued two non-dealing brokerages and one money manager licence.
Scope Markets, a non-dealing online foreign exchange broker licensed by the CMA, said it aims to create a digital workforce built on a community of online traders.
The firm is also targeting to train about 50,000 novice traders in currency dealing in the next two years as part of the company’s plan to integrate more Kenyans into the fast-growing digital economy.
“We want to lead the way in the online forex trading space as an income-generating scheme and a means of job creation for the youth in the digital economy,” said Scope Markets Chief Executive Kevin Ng’ang’a earlier.
“The biggest gap in the trading space is the lack of information, and we are dedicated to closing this gap through training and capacity building through mentorship.”
As a licensed player, Scope Markets provides a trading platform for investors to trade forex, global shares, indices and commodities online from the comfort of mobile phones or personal computers.
It is estimated that in the last five years, Kenya’s online trading space has grown tremendously with more than 200,000 traders, most of whom were trading on international broker sites.
The foreign exchange market is the largest, most liquid and most traded financial market in the world with a total volume of up to $5.3 trillion traded daily.
Online trading and Contract for Difference (CFD) trading refers to an agreement to exchange the difference between the entry and the exit price of an underlying asset.
Online forex exchange entails the trading of different currency pairs. These currency pairs are classified as majors, minors and exotics. CFDs trading, on the other hand, include indices, commodities, shares and precious metals.