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.
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.
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.
The 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 to trade 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 the suitability of clients to participate in online forex trading.
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.