The Nairobi Securities Exchange (NSE) will now exercise supervisory powers on the upcoming derivatives market after receiving formal recognition as a self- regulatory organisation (SRO) from the Capital Markets Authority (CMA).
The NSE said it has been granted the SRO status after successfully separating the management structures for its commercial and regulatory functions in line with the Capital Markets (Demutualisation of the Nairobi Securities Exchange Limited) Regulations of 2012.
The CMA will, however, still set the fees to be paid by investors participating in the new market, given that the self-regulatory powers do not allow the NSE to determine market fees for the derivative, equities and bonds markets.
“The CMA recognised the NSE as an SRO in respect of specified existing responsibilities including establishing rules governing the conduct of derivatives members and their clients, supervising the members and markets to monitor compliance with the (derivatives) rules, regulation of NSE clearing and settlement systems and enforcing compliance with the derivatives market rules,” said the NSE.
Chief executive Geoffrey Odundo said last month that the derivatives market, which would allow investors to hedge against risk (consisting of futures, options, swaps and forward contracts), would go live before the end of the year.
The mandate of the exchange as an SRO will also include admission to listing on new offers, monitoring the compliance of set obligations by companies looking to raise capital in the market, admission of trading participants and oversight of the market’s trading participants.
The NSE had already been granted partial self-oversight, such as being allowed to approve new Growth and Enterprise Market Segment (GEMS) listings coming onto the market in cases where the firms were listing by introduction.
The CMA retains the approval authority on GEMS listings that raise capital, essentially those listing by way of IPO.
The CMA had mooted the plan to have the NSE become a self-regulating entity in its 10-year masterplan, which was to kick in once the NSE became fully demutualised.
The CMA said in the masterplan that a demutualised exchange would be given the authority to set its own fees, create and enforce industry regulations and standards, helping it obtain and allocate the resources it needs to rapidly respond to market developments and opportunities.
