CMA Opens Up Market to Exchange Traded Funds

NAIROBI, Kenya

The Capital Markets Authority (CMA) plans to introduce Exchange Traded Funds (ETFs), which will allow more investors to enter the market and improve liquidity.

An Exchange Traded Fund is an investment fund traded like other securities on securities exchanges, much like stocks. Exchange Traded Funds (ETFs) will give investors access to stock markets in different countries at a lower cost compared to other investments.

CMA Acting Chief Executive Paul Muthaura said the introduction of ETFs will help address the issue of relatively low market liquidity, which has been one of the key challenges that the capital markets have faced over the years.

“The new product will mainly target individual investors who would affordably invest in a diverse number of capital market and commodity assets, ranging from hard commodities such as commodity ETFs to international equities in the form of international equity ETFs,” he said.

In a statement, CMA noted that individual investors would have access to segments of the market that were previously inaccessible. ETFs will also make it easy to invest in a targeted portfolio of common stocks and bonds by investors purchasing just a single security.

The move comes when the capital markers regulator has introduced more products as it seeks to diversify investment portfolios and improve liquidity. ETFs are part of a bigger cluster of financial instruments known as Exchange Traded Products that are growing in popularity as a method of investing, providing the opportunity for investors to diversify their portfolios while maintaining flexibility in trading.

CMA is seeking to engage a consultant to provide technical assistance in developing the policy and regulatory framework as well as recommendations on market infrastructure requirements for ETFs.