Nairobi Securities Exchange prepares for derivatives market launch

NAIROBI: Local and international investors will be able to trade in derivative contracts at the Nairobi Securities Exchange (NSE) starting this year. The bourse yesterday invited proposals for the 12-member committee which will serve as the inaugural board of the Derivatives Market Oversight Committee.

“The exchange is required to set up the oversight committee which is an independent committee of the NSE that will advise the board on risk, strategy issues and oversight roles relating to the NSEs Derivatives Market and the NSE Clearing House, stated Mr Andrew Wachira, NSE’s acting CEO, in a statement.

The committee will be made up of a minimum of seven individuals nominated by the NSE one of whom must be an executive of the NSE and/or the Clearing House.

Other members include two directors from the NSE who represent the public interest and two individuals representing the public interest. The chairman of the committee shall be appointed by the board of the NSE. The launch of the derivatives market is an additional feather in the cap of East Africa’s largest exchange which last year completed a successful demutualisation process becoming the second in Africa to do so.

DERIVATIVES MARKET

The NSE’s derivatives market is modeled around the Johannesburg Stock Exchange Derivatives Market which was last year ranked first among 144 nations for the effectiveness of regulation and supervision of its markets.

“The derivatives market will not only offer a wider range of investment alternatives to investors but also allow individuals and businesses to manage the risks associated with changing currency exchange rates and interest rates,” stated Mr Wachira. “In the medium term the Derivatives market will also trade derivatives on agricultural products which are key pillars of the Kenyan economy.”

The NSE has already received the green light from the regulator the Capital Markets Authority to set up and operate a Derivatives Exchange. Nominees and appointees to the committee should have sufficient, recent and relevant knowledge of financial products, derivatives, regional and international markets, risk and regulatory expertise.