The Nairobi Securities Exchange (NSE) will introduce Options Derivatives trading on NEXT, the NSE’s Derivatives Market, following approval from the Capital Market Authority. The introduction of Options contrats is aimed at developing and deepening the derivatives market in Kenya by expanding the suite of financials instruments available to investors.
Options are financial derivatives contracts that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date. Investors on NSE will be able to trade Options on the existing NSE futures contracts for single stocks and indices. NSE plans to introduce a wider variety of financial derivatives to provide investors with more investment opportunities that complement their strategies and investments in other exchange-traded products to support enhanced returns and risk management.
Commenting on the development, Mr. Frank Mwiti, Chief Executive Officer, NSE noted, "The NSE is delighted to receive approval to launch Options on Futures contracts on the NSE. The introduction will provide investors new instruments to support efficient capital deployment whilst offering advanced risk management tools enabling hedge against adverse price movements in the underlying contracts. In advance of the rollout, the NSE will conduct extensive investor education and run additional trade and settlement tests with clearing and trading members. Equally, the NSE will monitor various risk management control measures to limit potential defaults thus ensure the Derivatives market continues to attract high level of trust from both investors and trading participants."
"The proposed introduction is designed to meet growing market demand and is equally in line with our commitment to build a world-class market infrastructure anchored on a wide array of investment products that meet current and future investor's needs" he added.
All contracts will be cash-settled using existing infrastructure of NSE Clear and supported by our network of clearing members and trading members.
