By Jackson Okoth

The Nairobi Stock Exchange (NSE) is yet to procure a broker back office system and has moved back to the market to shop for a vendor.

The bourse is seeking a vendor who can provide end-to-end automated solutions directly to individual brokerage firms with seamless integration to electronic trading, central depository and the national clearing and payment systems.

"The NSE on behalf of Central Depository and Settlement Corporation, Capital Markets Authority (CMA) and Kenya Association of Stockbrokers and Investment Banks (Kasib) intends to procure a broker back office system for the 18 active licensed stockbrokers," the bourse said in a re-advertisement.

Industry insiders

However, this latest initiative is the second time NSE is advertising for a vendor after it cancelled the first tender due circumstances that remains unclear. But industry insiders reckon that the cancellation could have been fuelled by a number of factors including failure by the bidders not meeting the required standards.

Officials at the CMA have in the past said that while the automated trading system and Central Depository and Settlement system (CDS) were procured from the same vendor — Millennium Technologies — the dealer does not have a broker back office.

Currently, it is only the automated trading system (ATS) at the NSE and the CDS systems that are linked.

This has left the back office operations of stockbrokerage firms’, opening up loopholes for fraudulent activities from unscrupulous players.

The broker system supports trading of equity and debt instruments, with centralised control and in-built risk management mechanisms across the entire trading process.

The proposed system should have detailed audit trail and log file tracking with exceptional reports including violations.

"It will be possible to have an audit trail within the whole system, effectively sealing loopholes used by fraudsters," said Mr Job Kihumba, Standard Investment Bank executive director.

Kasib officials admit that the current system is vulnerable to fraudsters but recent incidences could have been exaggerated, causing unnecessary panic.

Commercial banks

"While commercial banks face problems of ATM thefts, insurance firms have to deal with fraudulent claims as fraud hits the entire financial sector," says Kihumba.

To prevent collusion between CMA, NSE and unscrupulous employees from stockbrokerage firms, the industry hopes a common back office software would seal the loopholes.

At present, there is no linkage between the CDS and ATS and broker back offices.