Kenya: NSE Bullish on Derivatives 2019 Launch

The Nairobi bourse plans to roll out the long-delayed financial derivatives market early next year, enabling investors to enter into contracts to buy or sell single or a set of stocks for a specified price and time in future.

The launch will follow a two-phase test trade which began last month and expected to end in November, head of derivatives market at the Nairobi Securities Exchange (NSE) Terry Adembesa said on Tuesday.

The first phase between July 3 and August 3 saw the seven participating investment banks and stockbrokers trade in three-month contracts using virtual cash of up to Sh1 million.

This was aimed at testing market system set-up, trade execution, reporting and settlement as well as risk management controls, Mr Adembesa said.

"Now more than ever, there’s sight of a go-live date," Mr Adembesa said.

"Once we conclude the three-month pilot phase in November, we will do reports and send them back to the regulators. They will then sign off if they are happy, if they are not they will tell us to tweak one or two things and then we go to the full launch in the first quarter of next year."

The second three-month pilot phase from next month is set to see real cash exchange hands, he added.

AIB Capital, Sterling Capital, Faida Investment Bank and NIC Securities are the trading members in the test phase under Stanbic Bank as the clearing bank, while Co-operative Bank is the clearing house for Kingdom Securities, Genghis Capital and Standard Investment Bank.

They will trade in Safaricom, Equity Holdings and KCB Group as single stocks contracts and the NSE-25 as Index contracts, paving way for full roll out next year.

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