A list of seven stockbrokers and three banks to play a central role in broadening capital markets to higher risk assets has been unveiled.
The Nairobi Securities Exchange (NSE) is expected to launch a derivatives exchange this year, giving investors a platform to hedge against risks.
According to NSE chief executive officer Geoffrey Odundo, seven brokerage firms — Dyer and Blair, Genghis, AIB Capital, SBG Securities, Faida Investment Bank, Kestrel Capital and Standard Investment Bank — have been admitted by the bourse to operate as derivatives brokers.
“The (launch) plans are at an advanced stage with the NSE having admitted three clearing banks (Co-operative Bank, CFC Stanbic and Barclays Bank) as well as seven derivatives brokers," Mr Odundo noted.
The three banks would provide financial settlement services for transactions between different clients and the brokers at the derivatives exchange.
The new exchange is modelled on the Johannesburg Stock Exchange’s derivatives market that trades futures and options on equities, bonds, currencies, indices, interest rates and commodities.
The establishment of the exchange is likely to be a boon to investors seeking to cushion themselves against interest rates fluctuations, exchange rate volatility and commodity prices.
The delivery date of some assets will be set later, at an agreed price, while others will be done at the time of transaction.
Last December, the Nairobi bourse received preliminary approval from the Capital Markets Authority to establish the derivatives market, which will be trading futures contracts and options that hedge against risk.
In futures contracts, parties agree to buy or sell assets or commodities at a given time in the future at a price agreed well in advance.
Option contracts, on the other hand, give the buyer or seller the right to buy or sell a given asset at a given price on or before a given future date.
Mr Odundo said the new exchange would “give the investors additional instruments to not only invest in, but also provide tools for the efficient and effective management of risk”.
