Treasury bonds to trade on electronic platform

By john njiraini

The Nairobi Stock Exchange (NSE) is calling on issuers of corporate bonds to take advantage of the automated trading environment to boost liquidity in the market.

The KenGen bond, which was launched on November 9, is currently the only corporate bond that has been immobilised, and listed on the automated trading system (ATS).

"I would now urge other issuers of corporate debt to immobilise their securities for trading on the exchange," Peter Mwangi, the bourse’s chief executive said.

Mwangi was speaking during the official launch of the automated trading of treasury bonds at the NSE on Monday.

Although other corporate bonds can join the electronic trading stage, those already in issue and traded manually have to ask their bondholders to immobilise their certificates, through an immobilisation timetable approved by the Capital Markets Authority and CDSC.

"It is truly a milestone for us in the market. We are now fully live in automated trading," Mwangi said.

Treasury bonds account for up 92 per cent of the Sh385 billion bonds Market.

Ms Stella Kilonzo, the Capital Markets Authority (CMA) chief executive, blamed the dismal performance of the bond market on slow and inefficient manual trading and settlement processes.

"There is more work that needs to be done with regard to bond turnover and liquidity," said Kilonzo, adding that, "from today we expect an increase in turnover."

The NSE marked the first day of electronic trading in Government bonds on November 27

The ATS, which offers real-time data streaming from the transactions, and more information on bond market mechanics, is expected to offer more liquidity, and attract more retail investors.

The NSE trading platform is linked directly to the Central Bank’s Central Depository (CDS), which uploads Government bond securities electronically to the ATS.

Increase liquidity

The automated bond market is expected to increase liquidity and enhance efficiency by linking the trading platform to the settlement arm of the NSE.

The settlement cycle is guaranteed at T+3 for both corporate bonds and Government bonds.

Trading of bonds via the ATS is expected to facilitate accurate analysis of supply and demand, thereby enhancing price discovery in the market.

Kenya’s bond market has remained relatively underdeveloped compared with those of other countries in the continent, having more Government securities and just a few corporate issues.