Bond settlement period reduced to three days

By James Anyanzwa

Treasury and Corporate bond settlement cycles at the Nairobi stock Exchange (NSE) have dropped to three days after the day of agreement (T+3).

The landmark achievement follows the automation of bond trading and subsequent immobilisation of the securities by issuers.

Uncertainties linked to the manual-trading environment previously resulted into longer settlement cycles of six or eight days (T+6 or T+8).

NSE chairman Eddy Njoroge said all government and corporate bonds listed on the NSE are now immobilised and trade through the automated trading system. "This has improved the time it took to conclude transactions. Delivery versus Payment (DvP) is concluded in three days, which is the globally accepted standard," he said.

Mr Njoroge was speaking at the bourse’s 56th Annual General Meeting in Nairobi last week.

Bond automation enhances increased liquidity, reduces operational risk, and allows efficient dissemination of bond pricing and yield information from a centralised, credible source.

Stages of automation

Last year, NSE in conjunction with other stakeholders in the capital market completed and launched the automation of the bond market.

On November 9, the KenGen Public Infrastructure Bond, which by then was the only immobilised corporate bond, was traded via the Automated Trading System (ATS).

In November last year the Government’s treasury bonds commenced trading via the ATS.

Njoroge said automation of the bond market made it easier for issuers to tap into a large pool of capital as seen by the successful uptake of the infrastructure bonds.