The Kenyan shilling will be excluded from online forex exchange trading for an uncertain period as the Capital Markets Authority (CMA) moves to effect new laws.
According to CMA Director for Regulatory Policy and Strategy Luke Ombara, Central Bank of Kenya (CBK) wants to monitor the likely impact of having the shilling trade against other currencies in the era of a first-time legislation on online forex trading.
“We have removed the requirement for use of Kenya shilling in any of the index because CBK is still undertaking a study on how that will impact on foreign exchange volatility in the country,” said Ombara when CMA and Chartered Certified Accountants (ACCA) signed an agreement to undertake joint financial literacy initiatives in Nairobi yesterday.
He said for instance, in the likelihood of one million people wanting to buy the dollar, they would cause excess demand for the currency, leading to negative impact on the shilling.
“It is something that is anticipated, but research is being undertaken,” he said, adding that forex businesses would be giving the regulator a summary of traded volumes per currency every month.
In mid-July last year, CMA published a proposed legislation to help bring order in the previously unlegislated online forex exchange business despite more than 50,000 Kenyans being participants.
Mr Ombara said CMA had already submitted the draft regulations to the Attorney General for gazettement through the National Treasury.
“They will go through Parliament, but guided by Statutory Instruments Act, which means that once gazetted by the AG, within 28 days if Parliament has no objection, it automatically becomes law,” he said.
The timeline within which the legislation will become operational is, therefore, based on how fast the AG will publish it.
In the absence of local legislation, Kenyans have been using platforms, mostly in the UK, to trade on their own.
Local and international brokers involved are members of exchanges where they trade but, had never been regulated in Kenya.