Experts want large blocks of shares traded away from bourse

By JAMES ANYANZWA

NAIROBI, KENYA: Large blocks of shares, which have the effect of distorting market prices, will be traded away from the Nairobi Securities Exchange (NSE).

The move is part of a mega plan by a coalition of financial experts to bolster activity at the 60-year-old exchange and deepen the market.

The experts reckon that large blocks of stocks should be traded directly between stockbrokers and then reported to the exchange.

According to their 10-year (2014-2023) Capital Markets Master Plan, exposing such large orders of shares to the market would impact the price since it is often undertaken at a price different from that currently available in the market.

 “Rules will need to be put in place to determine what size of transaction constitutes a block trade, what deviation from market prices is allowed and to ensure that such trades are reported to the market,” the experts said.

“Such rules are needed in order to prevent liquidity moving to a dark pool of trading that is not seen by other investors.”  According to the plan, which seeks to provide a strategic direction for the capital markets, the regulator Capital Markets Authority (CMA) will be required to change the rules to allow for block trading.

WAVE OF REFORMS

The roadmap, crafted by a steering committee consisting of financial sector regulators, industry associations, academics and other industry experts, also seeks to support the creation of Kenya as an international financial services hub.

Under the plan, the shareholding structure of the Central Depository and Settlement Corporation (CDSC) will also be restructured in a new wave of reforms seeking to improve corporate governance and enhance the development of the local capital markets.

Also to be reshuffled is the composition of the corporation’s board of directors, which has currently locked out the main users of the central securities depository (CSD)—stockbrokers, custodians, registrars and the Central Bank.