Pilot NSE Derivatives Market gets CMA nod

Pilot Phase Test of the Derivatives Market, which will commence within the next six months, will be restricted to select market participants and a select product category

The Nairobi Securities Exchange (NSE) has received approval to undertake a Pilot Phase Test for the Derivatives Market within the next six months. This follows NSE’s satisfactory fulfillment of the requirements set out in Section 36A of the Capital Markets Act and The Capital Markets (Derivatives Markets) Regulations, 2015.

The approval will enable the Exchange to commence a Pilot Phase Test of the Derivatives Market, which will be restricted to select market participants and a select product category. It will focus on Equity Indexes and selected Single Stock Derivatives. The overarching aim of the pilot phase, is to test the functionality and process of end to end transactions in a live environment.

In line with its mandate to maintain efficient and smooth functioning financial markets, the Central
Bank of Kenya (CBK) has granted a provisional approval to the Stanbic Bank of Kenya and the Cooperative Bank of Kenya to participate as clearing and settlement members during the pilot testing
phase.

Commenting on the announcement, the NSE Chief Executive Geoffrey Odundo said: “The
Exchange is deeply grateful for the continued support it has received from the regulators – Capital
Markets Authority (CMA) and CBK, the two banking institutions (Stanbic Bank of Kenya Ltd and the Cooperative Bank of Kenya Ltd), trading members and other stakeholders; and looks forward to a
successful completion of the pilot phase which will inform stakeholders and regulators decisions on
the official roll out of the Derivatives Market.”

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He added: “The establishment of a globally competitive Derivatives Market is in line with the NSE’s
2015 – 2019 strategic plan, which aims to increase listings in the Exchange while enhancing product
innovation. The Derivatives Market will further enable trading and clearing of multi-asset classes,
while providing our investors with an opportunity to further diversify their portfolios.”

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