The Nairobi Securities Exchange has received a provisional licence for the establishment and operation of a derivatives exchange from the Capital Markets Authority.

 The bourse has also received approval of the NSE Derivatives Exchange Rules and related documentation in support of the application. This approval enables the Exchange to achieve its strategic plan which seeks to enhance new listings and diversification of products in order to take advantage of new growth opportunities in the market.

Derivatives market is the financial market of instruments like futures contracts or options.

They are among the most affordable and convenient means companies can cushion themselves against interest rates fluctuations, exchange rate volatility and commodity prices. Derivatives also boost liquidity in the underlying assets.

“The establishment of a derivatives market is a step towards growing the NSE brand and shareholder value,” said chairman of the Exchange, Eddy Njoroge.

Acting Chief Executive of the Exchange Andrew Wachira said, “The NSE will now establish a globally competitive derivatives exchange that will enable spot and futures trading of multi-asset classes including equities, currency, interest rate products as well as varied forms of agricultural commodities contracts. The Exchange has invested in the development of the Derivatives Market to ensure that it will meet global standards including mechanisms for trading, clearing and settlement of the instruments traded.”

NSE said it would prepare product and contract specifications, and educate the public  in preparation of the Derivatives Market launch.

 

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