Nairobi Securities Exchange (NSE) investors can now buy and sell shares of any company within a single trading day. This would allow them to profit from instant price movements triggered by events like profit announcements.
The NSE today received approval from the Capital Markets Authority (CMA) and will roll out the practice—usually called day trading—on November 22.
“Day trading is a welcome move for local investors who have previously lobbied for the activation of the intraday trading, as they seek to take advantage of intraday price movements and increase their profit margins,” said Geoffrey Odundo, chief executive at the NSE.
Traders will be allowed to purchase or sell a security within a single trading session or multiple times over the course of the day.
This will give investors a chance to profit from events that trigger short-term share movements such as when companies announce results, key executives exit abruptly or government announces new policies.
Events such as imposition of interest rate caps and later on its removal as well as discovery of Covid-19 in Kenya and the containment measures that followed all led to movements in share prices.
Share prices usually react when such events happen when the market is open, meaning that significant moves will now benefit day traders.
NSE has offered a discounted levy of 0.114 per cent on the second leg of such transaction compared to the usual 0.12 per cent as it seeks to promote the uptake.
In trading, a leg is a single position taken in trading. For instance, the first leg is when buys shares. The second leg is when the same shares are sold.
NSE said the benefit of discounted levies will be enjoyed by the investors directly through their trading accounts.
“Day trading will allow investors to trade on one position, two or three times per day. This will significantly increase our turnovers and attract more investors to the bourse,” said Kiprono Kittony, chairman at NSE.
The day trading is the latest innovation for the NSE, which has been riding on technology to launch new products such as derivatives and gold exchange traded funds.
The NSE in October 2019 commissioned a new trading system that allowed for separation of the trading and post trading activities.
The separation paved the way for the introduction of new products including covered short selling. NSE also rolled out unquoted securities platform (USP) earlier in the year.