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Boost to mart as derivatives debut on NSE

  by Lewis Njoka


The need to develop necessary systems to position Kenya as a global financial markets leader contributed to the delayed launch of derivatives market by Nairobi Securities Exchange (NSE),  the  sector regulator explained yesterday.

Capital Markets Authority (CMA) Chief Executive Officer, Paul Muthaura said all stakeholders first wanted to gain a common understanding of the derivatives market after it became unpopular during the 2008 global financial crisis.

Speaking in Nairobi during the official launch of the NSE Next Derivatives Market, which will trade in equity index futures and single stock futures, Muthaura said the market would offer more opportunities for investment and make it easy for investors to manage risks effectively.

Derivatives are financial securities, such as bonds, stocks, commodities and currencies, whose value fluctuates depending on changes in the value of the underlying asset. Underlying assets can be stocks, currency, gold and so on.

Chief Administrative Secretary for the National Treasury and Planning, Nelson Gaichuhie, termed the launch a key milestone, one that signified the country’s capital markets had reached a high level of sophistication.

“Capital markets are an integral part of the economy and a key driver of the country’s economic agenda. Today’s derivatives market launch will position Kenya as a key investment gateway,” he said.

Highly regulated

NSE Chief Executive Officer, Geoffrey Odundo (pictured) called on investors to take advantage of the new market, saying the new markets would have no defaults as it was centralised, highly regulated and would be under constant surveillance from NSE and CMA.

“There are funds set up to compensate investors in case of a loss. Anti-money laundering and know-your-customer regulations at NSE are strict to curb against illegal activities,” he added.

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