KENYA, APR 19 — The Nairobi Securities Exchange is on course to roll out the derivatives market in Kenya, Chief Executive Geoffrey Odundo has said, calling on investors to remain on the watch and closely follow activities at the bourse.
Speaking during a press conference on the sideline of the 7th Building African Financial Markets (BAFM) seminar in Nairobi, Kenya, Odundo said the NSE is working closely with market regulator-Capital Markets Authority and key stakeholders to make the process a success.
“The derivative market is something we are working on. I must say we appreciate the level of progress we have made. A lot of work is still going and the markets are responding well and are looking at the right time to come on board,” Odundo said.
He said NSE is also keen to roll out new products in the near future, as it supports the national agenda of making Kenya a regional leader in financial services under the country’s Vision 2030.
Recent successful products at the bourse include the Real Estate Investment Trust (REITs) first launched in 2015 and the Exchange Traded Fund (ETF) which went live in March last year.
NSE has also signed an agreement with the Kenya Bankers Association and other players, to tap into opportunities in the Green Bond market.
“It (derivative)is a top priority for the exchange especially on new products. Even as we try to get listings in the market we are looking at other opportunities,” he said.
According to NSE, the derivatives market in Kenya has huge potential, supported by increased volatility in asset prices in financial markets.
The market has been anticipating derivatives trade since 2015 but NSE has been pushing its launch to adequately prepare the market.NSE will act as the clearing house.
It has created a complete trading structure which includes clearing agents, trading members (futures brokers), clients, a guarantee fund and an investor protection fund.
A derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate.
Derivatives can be used to insure against price movements (hedging), increasing exposure to price movements for speculation or getting access to otherwise hard-to-trade assets or markets.
Capital Markets Authority CEO Paul Muthaura said the regulator is closely working with the NSE and other entities in ensuring good regulatory structures are in place to support the country’s capital markets.
“We are keen to restructure the markets, strengthen legal framework and deepening of the markets,” Muthaura said, “as capital markets regulators, we are keen on actively playing our role in positioning Kenya as an investment hub for East Africa and middle Africa.”
Meanwhile, the African Securities Exchanges Association (ASEA) President Oscar Onyema has called on African securities to educate publics and institutions on the processes involved in investing in markets.
“We need to give ourselves more time, work very hard to let people know about this products or better still make them understand how these products can help them diversify their portfolios ,” said Onyema, who is also the chief executive officer of the Nigerian Stock Exchange.