Coffee trading in Kenya moved from the Agriculture and Food Authority’s Coffee Directorate to the Capital Markets Authority (CMA) in 2020, when coffee exchanges became a formally licensed category of market infrastructure alongside the wider commodity markets regime. This article covers what a coffee exchange licence actually requires, and the separate fee structure that applies once an exchange is operating.
A Dedicated Regime, Not a Commodity Exchange Subcategory
Coffee exchanges are licensed under their own instrument, the Capital Markets (Coffee Exchange) Regulations, 2020 (Legal Notice 40 of 2020), gazetted the same day as the general Capital Markets (Commodity Markets) Regulations, 2020 (Legal Notice 41 of 2020). The two were developed together as part of the CMA-led Coffee Sub-Sector reforms, but coffee gets its own dedicated regulatory instrument because of features specific to the crop: an auction system, licensed coffee warehouses, a Direct Settlement System for proceeds, and integration with the separate Crops (Coffee) (General) Regulations, 2019 licensing regime for millers, roasters, and warehousemen.
Documentation Requirements
An application requires Form A under the First Schedule to the Regulations, certified certificate of incorporation, certified memorandum and articles of association permitting the business, and the applicant’s proposed rules drafted under regulation 5. Beyond that, the CMA requires measures the exchange will use to actively enforce member compliance and prevent manipulation and excessive speculation, details of the trading, clearing, and settlement systems proposed, satisfactory bank references, and a business feasibility plan under the CMA’s Business Model Analysis Guideline, evaluated by an entity with a proven track record in coffee exchange development or management.
The business plan itself must cover the capital markets business explanation, target market and clientele, business model, short and long-term objectives, outsourcing plans, key conduct risk analysis, management structure, board composition (drawing on both section 29(1) of the Capital Markets Act and, notably, regulation 10 of the general Commodity Markets Regulations rather than the Coffee Exchange Regulations themselves), company secretary details, shareholding structure under section 29(5) of the Act, external auditor, premises, and staffing, including the chief financial officer, risk management officer, compliance officer, and internal audit functions required under the Corporate Governance Regulations.
Capital and Financial Requirements
As with the general commodity exchange licence, the Regulations require evidence of minimum authorised, issued, and paid-up equity share capital sufficient to support initial infrastructure investment and three years of operating capital, without fixing a specific figure; this is assessed against the individual proposal. The liquid net-worth requirement is more precisely specified here than in the general Commodity Markets Regulations checklist: an amount equal to one half of the exchange’s estimated gross operating costs for the following twelve-month period, or such other amount as the CMA prescribes. A minimum deposit into a settlement guarantee fund, determined by the CMA, must be made before trading begins.
Coffee-Specific Infrastructure Requirements
This is where the coffee regime diverges most from general commodity exchange licensing. An applicant must evidence a system providing reasonable auction access to all persons licensed under the Crops (Coffee) (General) Regulations, 2019, a database recording coffee sales at the auction floor and related trade activity, a linkage between the Direct Settlement System provider and licensed coffee warehouses so that coffee can be released to buyers or roasters on payment, a system for disseminating market information after every auction with daily, weekly, and monthly performance analysis, and a direct systems link between the exchange and the CMA’s own infrastructure. None of these appear in the general commodity exchange checklist; they exist specifically because of how the coffee auction and warehouse-release process works in practice.
Why the AFA-to-CMA Transition Still Matters
Before 2020, coffee trading operated under the Coffee (General) Regulations through the Agriculture and Food Authority’s Coffee Directorate, a purely agricultural regulatory framework with no capital markets dimension. The 2020 shift to CMA oversight was driven by recognised structural problems in the sector: supply chain inadequacies, constrained farmer access to credit, inefficient price discovery, price volatility, and poor market access that pushed up production and marketing costs for smallholder growers. Bringing coffee trading under capital markets regulation was meant to professionalise price discovery and settlement in a way agricultural regulation alone could not. This history matters practically because coffee millers, roasters, and warehousemen remain licensed separately under the Crops (Coffee) (General) Regulations, 2019, which sits with a different regulatory body entirely. A coffee exchange applicant needs to understand both regimes, since the CMA licence for the exchange itself does not replace or absorb the AFA-administered licences for the participants trading on it.
Licensing Application Fee
The application fee stated in the CMA’s checklist is Kshs. 10,000. Unlike the online forex broker fee, we found no separate amendment superseding this specific figure, so it appears to remain current, though it should still be confirmed directly with the CMA before being quoted as final.
Ongoing Transaction and Membership Fees
Separately from the licensing application fee, the Capital Markets (Coffee Exchange) (Fees) Regulations, 2024 (Legal Notice 9 of 2025, in force from 30 January 2025) set the fee structure for actually operating on the exchange once licensed. A transaction fee of up to 1.8% of the gross value of coffee sold is deducted from sales proceeds through the Direct Settlement System, apportioned as 1% to the broker, 0.3% to the coffee exchange, 0.3% to the Direct Settlement System provider, and 0.2% to the CMA as a statutory fee. Annual membership fees are also fixed: Kshs. 75,000 for brokers and for buyers purchasing more than 1% of annually traded coffee, Kshs. 50,000 for smaller buyers purchasing under 1%, and Kshs. 115,000 for associate members including warehouse operators, millers, transporters, export bag providers, input suppliers, Direct Settlement System providers, other commercial banks, and coffee or commodity funds. This fee structure is worth building into any coffee exchange or broker business plan from the outset, since it directly affects margin on every transaction. It also means a coffee broker’s economics are structurally different from a general commodity broker’s, where no equivalent statutory transaction-fee split exists in the checklist we reviewed, so the two should not be modelled on the same assumptions when advising a client on either.
How This Fits the Wider CMA Framework
Coffee exchange licensing sits alongside the general commodity exchange and broker regime as a related but distinct instrument. See our guide on commodity exchange and commodity broker licensing for the general regime, and our overview of Capital Markets Authority licensing in Kenya for the full CMA landscape.
How We Can Help
Clay & Associates Advocates advises on coffee exchange licensing applications, including the coffee-specific infrastructure and governance requirements, and on structuring the fee arrangements between brokers, buyers, and Direct Settlement System providers under the 2024 Fees Regulations. Contact our regulatory and compliance team to discuss an application. We also advise participants further down the chain, such as millers, roasters, and warehousemen, on how their AFA-administered licences interact with the exchange’s own rules and the Direct Settlement System, since disputes at the warehouse-release stage often trace back to a gap between the two frameworks rather than a failure in either one on its own.
Sources: Capital Markets Act, section 29; Capital Markets (Coffee Exchange) Regulations, 2020 (Legal Notice 40 of 2020); Capital Markets (Coffee Exchange) (Fees) Regulations, 2024 (Legal Notice 9 of 2025); Capital Markets Authority, Coffee Exchange compliance checklist.
