East African Bond Exchange Gets Licensed for OTC Trading in Kenya

The Capital Markets Authority (CMA) of Kenya has granted the East African Bond Exchange (EABX) a license for Over-the-Counter (OTC) trading. 

OTC trading involves the direct exchange of securities between two parties operating independently. 

“This type of trading is often used for securities that are not listed on a formal exchange or for large block trades that may not be easily executed on the open market,” says the CMA.

The 29th edition of the Capital Markets Soundness Report (CMSR), themed “Enhancing capital markets’ liquidity through transparency and efficiency in Over Counter (OTC) trading and trade reporting,” stated that there are renewed and active industry-wide efforts driven by the CS for Treasury with a focus on revitalising the Kenya Bond OTC Markets initiative to increase market depth and liquidity of government bonds through efficient pricing and transparency. 

“When you look across the globe, the biggest OTC market is foreign currency. You can also find trading in OTC in equities, debt securities, derivatives, and many others. Bonds, despite being not very small issuances, are finding their way in most jurisdictions in trading via OTC. 

Contrary to what you expect in a centralised exchange, the requirements for trading in an OTC market are far less onerous. 

The annual market turnover for Nigeria’s FMDQ comes to about Sh90 trillion annually, and you can see the potential given that we were slightly way ahead of Nigeria in terms of bond market reforms,” said CMA’s Director for Policy and Market Development, Luke Ombara.