Nairobi Securities Exchange to open links with top African markets

Nairobi Securities Exchange (NSE) trading floor.

NAIROBI: Local investors could soon buy shares directly from Nigeria, Morocco and South Africa.

This comes as part of a new cross-border trading plan promoted by the Nairobi Securities Exchange (NSE).

At present, investors are required to open an account with stock brokers in the various foreign countries to trade in securities including shares, bonds and derivatives.

NSE chief executive Geoffrey Odundo said the four countries are working on a pilot cross-border trading plan that could be actualised within the year.

This latest initiative will allow investors place their orders directly through the local stockbroker.

“We will enable local investors transact in the other markets, which has never been possible in Africa,” Mr Odundo said after releasing the trading results of the bourse last week.

NSE reported a decline in revenues and profitability following a difficult year in 2015 that was characterised by high interest rates and the introduction of capital gains tax, both hitting the transaction volumes.

NSE earns its revenues mainly from trading of securities on its platform. Cross-border trading is among the new revenue streams that Odundo’s firm is betting on for growth, alongside the introduction of a derivatives segment.

Capital Markets Authority (CMA) boss Paul Muthaura said the guidelines for the trading in derivatives, which are stocks whose value is dependent on underlying assets, have already been published.

NSE has been ready to introduce the derivatives market but the roll-out had been held back by the absence of guidelines.

In the proposed cross-border trading, stock brokers will have direct access to their counterparts in the four countries, eliminating the need for investors to open accounts in the foreign countries.

A new trading system that will enable the intended integration has been identified, the chief executive told investors, and will be installed before the switch.

Odundo said the enhanced exposure for investors is a major milestone for investments through broadening the market access, specifically for the small investors who might not have the financial capacity to trade beyond the domestic markets.

Through such access, investors can increase the diversification of their portfolios and help cushion them from country-specific market forces.

Bigger and institutional investors like insurance firms often have exposure in foreign markets, which at times perform better than the home markets.