Kenya’s commodity markets are licensed under the Capital Markets (Commodity Markets) Regulations, 2020 (Legal Notice 41 of 2020), which creates two distinct categories relevant to anyone entering this space: the commodity exchange itself, which operates the trading platform, and commodity brokers, who are the intermediaries trading on behalf of clients through that exchange. The two licences serve different functions and carry different requirements, though both sit under the same regulatory instrument and both require Capital Markets Authority (CMA) licensing under section 29 of the Capital Markets Act.
Commodity Exchange: Market Infrastructure
A commodity exchange licence is for the entity operating the trading venue itself. The application requires Form A under the First Schedule to the Regulations, a certified certificate of incorporation, certified memorandum and articles of association permitting the business, and the applicant’s proposed rules, drafted in accordance with regulation 6. Beyond the constitutional documents, the CMA requires details of the trading, clearing, and settlement systems the applicant intends to adopt, satisfactory bank references, and a business feasibility plan prepared under the CMA’s Business Model Analysis Guideline and evaluated by an entity with a proven track record in commodity market development or management.
The business plan itself must cover the nature of the capital markets business, target market and clientele, business model, short and long-term objectives, outsourcing arrangements, key conduct risk analysis, and management structure. Board composition follows section 29(1) of the Capital Markets Act together with regulation 10 of the Commodity Markets Regulations and the Capital Markets (Corporate Governance) (Market Intermediaries) Regulations, 2011, the same governance framework applied across CMA-licensed market intermediaries generally.
Commodity Exchange Capital Requirements
The exchange must evidence minimum authorised, issued, and paid-up equity share capital sufficient to support its initial infrastructure investment and three years of operating capital, though the Regulations do not fix this at a set figure; it is assessed against the specific proposal. Regulation 19 of the Commodity Markets Regulations sets a minimum liquid net-worth requirement that the CMA’s own checklist does not spell out in full; this should be confirmed directly against the regulation text before being relied on for a specific application. The applicant must also demonstrate financial capacity, functional expertise, and infrastructure to establish and operate a fair and efficient exchange, meet contingencies including technical failures in automated systems, and provide adequate security around risk identification, data protection, and critical infrastructure. A minimum amount, determined by the CMA, must be deposited into a settlement guarantee fund before trading can begin.
Commodity Brokers: The Intermediary Function
A commodity broker licence sits under Part III of the Commodity Markets Regulations, using Form B rather than Form A. Unlike the exchange, a broker does not need to build trading infrastructure; instead it must evidence minimum net capital and minimum net worth as determined by the commodity exchange it will operate through and approved by the CMA. This is a materially different structure from the fixed capital thresholds seen in online forex broker or money manager licensing: the figure is set by the exchange itself rather than the regulation, meaning it can vary depending on which commodity exchange a broker intends to join.
A commodity broker’s chief executive must be a fit and proper person under section 24A of the Capital Markets Act with at least five years’ experience buying, selling, or dealing in commodities, spot commodity contracts, derivatives contracts, or other securities. Where a broker is already a market intermediary of another securities or derivatives exchange, it must undertake to allocate a prescribed percentage of its net capital balance to support its commodity exchange activities, and that allocated net capital must not be less than the minimum required at the commodity exchange, must be kept segregated, and must be maintained at all times.
Shared Governance and Compliance Requirements
Both categories require disclosure of shareholding structure under section 29(5) of the Capital Markets Act, a board with a minimum of three directors, a third of whom are natural persons and a third of whom are independent and non-executive, with no more than a third being close relations of one another, and a non-executive board chairman. Both require a board charter addressing strategic oversight, risk management, conflicts of interest, and delegation of authority, and both require the chief financial officer and internal auditor to be members of the Institute of Certified Public Accountants of Kenya (ICPAK), with the internal auditor barred from also serving as compliance officer. Commodity brokers additionally require a written anti-money laundering and counter-terrorism financing policy consistent with the CMA’s Guidelines on the Prevention of Money Laundering and Terrorism Financing in the Capital Markets, and a declaration that shareholders, directors, and key personnel have not defaulted on dues at a commodity exchange clearing house.
Why the Two-Licence Structure Matters in Practice
Anyone entering Kenya’s commodity markets needs to be clear from the outset about which of the two licences their business model actually requires, since the two are not interchangeable and a broker cannot simply choose to be treated as an exchange for convenience. A business planning to operate the trading platform itself, set market rules, and run clearing and settlement needs the exchange licence and the infrastructure investment that comes with it. A business intending to act as an intermediary for clients trading on an exchange someone else operates needs the broker licence instead, and its net capital requirement will be set by whichever exchange it joins rather than fixed in the Regulations themselves. This means a prospective broker should confirm the specific net capital figure with its chosen exchange before finalising its own capital-raising plan, since the number is not the same across every commodity exchange operating in Kenya.
Application Fees
Both the commodity exchange and commodity broker checklists state an application fee of Kshs. 10,000. Given that a comparable fee under the Online Forex Trading Regulations turned out to be outdated following a 2023 amendment, this figure should be checked against the current Commodity Markets Regulations fee schedule before being quoted to a client as final.
A Note on the Regulation’s Correct Year
The CMA’s own Commodity Brokers checklist inconsistently cites the governing instrument as both the “2019” and “2020” Commodity Markets Regulations within the same document. The Regulations were in fact gazetted as Legal Notice 41 of 2020, published in Kenya Gazette Vol. CXXII, No. 58 on 3 April 2020. “2020” is the correct citation.
How This Fits the Wider CMA Framework
Commodity markets sit alongside the CMA’s securities and derivatives market regulation as a distinct structured markets regime. For a broader view of CMA licensing across categories, see our overview of Capital Markets Authority licensing in Kenya.
How We Can Help
Clay & Associates Advocates advises applicants on both commodity exchange and commodity broker licensing, including the governance documentation, business plan structuring, and the net capital arrangements between a broker and its chosen exchange. We work from the Regulations and the CMA’s own checklists directly rather than secondary summaries, which matters given the internal inconsistency we found even in CMA’s own commodity broker documentation. Contact our regulatory and compliance team to discuss an application.
Sources: Capital Markets Act, section 29; Capital Markets (Commodity Markets) Regulations, 2020 (Legal Notice 41 of 2020); Capital Markets Authority, Commodity Exchange and Commodity Brokers compliance checklists.
Coffee has its own dedicated exchange regime, separate from the general commodity framework covered above. See our guide on coffee exchange licensing in Kenya for the coffee-specific requirements and fee structure.
