INTRA-DAY TRADING OF SHARES AT NSE COULD SOON BE A REALITY.

trading at the NSE

 

Intra-day trading of stocks in the Nairobi bourse is set to become operational by the end of September 2015. The Central Depository and Settlement Corporation (CDSC) is currently installing a new system than will allow investors to purchase and sell shares in the same day. This will be a move away from the current system whereby transactions regarding purchasing/selling of shares are settled in four working days.

According to the CDSC chief executive Rose Mambo, the transactions on stocks will be moved to the Central Bank of Kenya (CBK) and will now be conducted through its Real-time Gross Settlement (RTGS) system. Currently, the CDSC uses four commercial banks to settle share transactions. The four banks are: CFC Stanbic, Equity, Barclays and Cooperative.

Once implemented, the move will reinforce the dominance of Nairobi Securities Exchange (NSE) in the region by making the shares traded in the bourse more attractive. This is because investors will be able to trade on margins gained during the day improving liquidity of shares traded in the market. This is particularly attractive for international investors who emphasize on the ease of entering and exiting a counter.

The new system will be much welcomed by brokers since this will push the volumes of trade up which means they will now be able to fetch more commissions on share trading.

The use of Real-time Gross Settlement (RTGS) system will help to address settlement risk. This is because the system will eliminate the chances of default that may be caused by a system failure in any of the four settlement banks. The Central Bank of Kenya (CBK) will settle with brokers' banks who will in turn settle with clients.

"This moves Kenya a step closer to attaining the status of a regional and international financial center as envisaged in Vision 2030." Said Paul Muthaura - the acting chief executive of Capital Markets Authority (CMA).

This is why you could soon be able to invest in the lucrative REAL ESTATE sector

a real estate project

 Investing in the real estate market has over the decades been reserved for wealthy individuals and corporate entities but thanks to the planned roll-out of REITS by the Capital Markets Authority (CMA), you too could soon be able to own a piece of real estate property.

REITS - Real Estate Investment Trust Scheme is basically a collective investment vehicle which allows investors to own rights or interests in a property in form of units and earn returns in form of rental incomes or capital gains. Once introduced, REITS will start trading in the Nairobi Securities Exchange(NSE) under the management of licensed REIT managers and licensed trustees who will offer safe custody of the assets of the REIT and oversee the activities of REIT managers.

Kenya will be the third African country to introduce the trading of REITS in its capital markets after South Africa and Nigeria. In Kenya, REITS are divided into two: Income REITS (I-REITS) and Development REITS (D-REITS). I-REITS derive their income from property rentals while D-REITS derive their income from construction of property for sale.

The commitment of the Capital Markets Authority (CMA) in introducing of these securities is affirmed by the recent approval of the REITS trustee license to KCB Group making it the third trustee to be licensed after the Housing Finance and Cooperative Bank. The licenses are approved after the Capital Markets Authority (CMA) establishes the compliance of the entities with the requirements of regulation 125 of the Capital Markets (Real Estate Investment Trusts) (collective investment schemes) regulations 2013. CMA has also granted licences to six REITS managers among them: Stanlib Kenya Ltd, Nabo Capital, Fusion Investment Management Ltd, CIC Asset Management, UAP Investments Ltd.

REITS will play a vital role in Kenya's economy by deepening the capital markets as Kenya embarks on its initiative to make Nairobi an international financial center. This will provide capital markets funds to developers that will help to re-energize the housing sector that has seen a constrained supply of housing units which currently stands at 50,000 units p.a against an annual demand of 200,000 housing units.

The investors (both retail and institutional) will also be salivating as they wait for CMA to officially roll out the REITS.