The Nairobi Securities Exchange (NSE) will start operating a derivatives market aimed at boosting its liquidity on the bourse.
On Wednesday, the Capital Markets Authority (CMA) issued the NSE a license authorisng the bourse to offer investors Equity Single Stock Futures (SSF) and Equity Index Futures (EIF) and later introduce other financial and commodities derivatives.
“The Derivatives Market will facilitate deeper and more liquid capital markets and position Kenya closer to becoming the Heart of Capital Markets Investment in Africa, as envisioned in the Capital Markets Master Plan’, noted CMA Chief Executive, Mr Paul Muthaura.
This follows the successful completion of a six-month Derivatives Pilot Test Phase conducted between July and December 2018, and resolution of key issues that emanated from the test phase.
In December 2014, the NSE was given a provisional licence allowing it to open a derivatives exchange.
The Kenyan bourse becomes the second exchange in Sub-Saharan Africa to take such an initiative, after Johannesburg Stock Exchange (JSE) Derivatives Market, which offers trading of futures and options on equities, bonds, indices, interest rates, currencies and commodities.
It has signed up six banks to act as clearing members- Barclays Bank of Kenya, Co-operative Bank of Kenya, CFC Stanbic Bank, NIC Bank, Chase Bank, and CBA Bank.