A recent announcement by financial markets regulator, Capital Markets Authority (CMA) that it has installed an advanced surveillance system at the Nairobi Securities Exchange (NSE) is breathing some fresh air to the bourse.
Not only has the market suffered low investor confidence due to illegal trading and other malpractice by rogue investment banks and stock brokerage houses, but also in ability of the regulator to catch up with these criminals.
We hope that this online surveillance system will capture underhand dealings that usually happen in the back room offices of most stock brokerage houses, including unauthorised sale of client shares.
Fingers in cookie jar
It is one thing, though to have an oversight system such as this which offers real time data and information.
But it is quite another to actually enforce trading rules at the bourse. Apart from ensuring that rogue dealers keep their dirty fingers from the cookie jar, the regulator should ensure that those found culpable are locked out from the system and dealt with fast, furiously, and exhaustively.
While measures are being taken to protect investor interests at the bourse, an equal zeal should be shown in dealing with those who lost cash in collapsed or financially distressed stock brokerage houses.
Even after CMA took over these collapsed institutions, the pace of either compensating those who lost their investments or selling off these entities to recover lost monies has been slow and tedious, with little information coming out to the thousands out there who are still waiting for CMA’s action.
This new surveillance software is coming at a time ICT isexpanding access in the financial market, especially within the banking system, insurance, equities market, and even the pension industry. ]
While the benefits of this financial inclusion drive are immense, technology is also exposing the investor to increased cases of cyber crime.
While CMA has done well to push for the online surveillance system to run in rogue dealers, it should also ensure that the entire IT infrastructure at the NSE has secure online access especially to external users. Further, to benchmark against best practice, CMA should allow its security systems to be audited by a reputable and independent third party.
It is commendable that the heap on CMA’s in-tray is now manageable especially after installation of the automated trading system, the broker back office and integration of all these platforms to the Central Depository and Settlement System.
The Broker Back Office software enables brokers to automate order collection, contracting, settlement, and accounting. It also has an audit trail functionality that tracks all changes made to data, and keeps a record of who changed it, and when.