Seven Kenyan investment firms have been recognized by the Capital Markets Authority (CMA) as trading members of the derivatives market.
According to CMA, they have been duly licensed and include AIB Capital Limited, Faida Investment Bank Limited, Genghis Capital Limited, NCBA Investment Bank Limited, Standard Investment Bank Limited and Sterling Capital Limited.
With the recognition, “All trading members of the NSE derivatives market may trade on their own accounts in order to take up proprietary positions,” said CMA.
They can also take up proprietary positions in the market. (a high-risk form of trading where instead of acting on clients’ orders and receiving commission payments, the trader assumes his own position with the capital of the firm.)
Being members, they will be expected to adhere to a strict code of conduct when offering their services as prescribed in The Capital Markets(Conduct of Business) (Market Intermediaries) Regulations 2011 when trading.
They will further be required to submit their exposures through the enhance Risk-Based Capacity Adequacy reporting template.
A market intermediary is an organisation licensed by CMA to offer services to clients within the Capital markets industry.
The derivatives market enables investors to diversify their investments, manage risk, and deploy funds more efficiently.
The Market consists of a Clearinghouse, Clearing members and Financial Institutions licensed by CBK), Trading members and Investment Banks), and Clients (Institutional and Individual Investors, Speculators, Hedgers, and Arbitrageurs).
The Nairobi based derivatives market offers single stock futures and Index futures. Clients are able to trade futures on 6 NSE listed stocks namely; Safaricom (SCOM), Barclays Bank of Kenya (BBK), KCB Group (KCB), Equity Group (EQTY), EABL (EABL), BAT (BATK) and futures on the NSE25 Share Index.
The trading fee for single stock futures is 0.17% of the value of trade while for index futures is 0.14%.
The derivative market registered a 44.14 percent decrease in trading to 205 contracts traded in Q4 2019 from 367 contracts traded in Q3 2019 according to CMA’s statistical bulletin for the quarter ended December.