The planned trade in financial derivatives on Nairobi Securities Exchange will delay further than June as stakeholders bid to deepen knowledge among participants and create public awareness.
The segment will enable dealers in shares and currencies to enter into binding contracts for buying or selling the units at a specified price and time in future, helping them better manage risks, hedge, arbitrage and speculate over their future value.
The NSE, which got the licence last October, initially planned to launch the derivatives market late last year but pushed it to March and then June, which the regulator says may not now be feasible.
Capital Markets Authority chief executive Paul Muthaura said the regulator has set up a dedicated derivatives team to support the NSE in setting up the market, benchmarked on South Africa’s, India’s and Brazil’s model.
The teams are planning a “detailed sensitisation programme on how the market works, the kind of contracts that will be available, the risks and benefits involved”.
“They (NSE) have developed the first proposed contracts which have been submitted to the Authority… and (we) will be looking specifically at support and development,” Muthaura said last Thursday. “The focus is on financial derivatives like single stock futures and foreign exchange futures, which the NSE is developing.”
NSE chief executive Geoffrey Odundo has said an international risk consultant and manager are helping build capacity for the local team.
“It is going to be a plain vanilla issue that people can understand because we are bringing in the basic of all the products,” Odundo said on March 24.
Chief executive of Kenya Association of Stockbrokers and Investment Banks Willie Njoroge said members are ready for the market, tipped to stabilise trading on the NSE.
“We are expecting the currency to stabilise in the foreseeable future such that we shall not be experiencing such crazy spikes that we have experienced in the past,” Njoroge said in a telephone interview.
