Kenya Pilots Securities Lending and Borrowing Platform

NSE Depressed as Traders Remain Cautious

Long term holders of shares at the Nairobi Securities Exchange will start lending their shares to brokers at a fee through the newly launched Securities lending and borrowing (SLB).

The scheme which is being piloted by the Central Depository and Settlement Corporation (CDSC) runs until October will allow securities lending and borrowing among investors in a view to bolster trading volumes and the size of market markers.

SLB is the temporary transfer of securities (shares) from one party, the lender to another, the borrower at an agreed lending/borrowing fee, with a formal agreement to return the securities either on-demand or at a future pre-agreed date.

The regulations for SLB transactions were gazette in 2018.

CDSC shall be implementing the pilot phase transactions under the Screen-Based Model. 

Screen-based-model is where the lender and borrower do not know each other as the lending and borrowing requests are captured on a platform in an automated system (CDS) by the SLB agents on behalf of their clients or on their own behalf.

“The success of this pilot will increase liquidity in the secondary market and will act as a lubricant to the market. There are economic benefits including additional income to lenders of securities in addition to fees earned by intermediaries,” said the Central Depository and Settlement Corporation (CDSC) CEO Nkuregamba Mwebesa.

“This will bring on more market players. A lot of pension fund investors hold long positions. These entities can now lend out their shares and arrive at greater gains,” added NSE CEO Geoffrey Odundo.

Faida Investment and Dyer & Blair Investment banks have been appointed agencies enabling the lending and borrowing transactions.