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).