This archive report was first published on 4 July 2019.
The Nairobi Securities Exchange (NSE) has taken a significant step in its growth as a leading financial hub in East Africa with the launch of its derivatives market. The market, which went live on July 4, 2019, is the first of its kind in East Africa and the second in Africa, after the Johannesburg Stock Exchange (JSE).
The derivatives market, known as the NSE Derivatives Market (NEXT), will enable investors to diversify their investments, manage risk, and deploy funds more efficiently. It will also position Kenya as a leading financial hub, attracting additional international investors.
The market will consist of a Clearinghouse, Clearing members (Banks and Financial Institutions licensed by the Central Bank of Kenya), Trading members (Brokers and Investment Banks), and Clients (Institutional and Individual Investors, Speculators, Hedgers, and Arbitrageurs).
Initially, the market will offer single stock futures and Index futures. Clients will be able to trade futures on 7 NSE listed stocks, namely Safaricom, KCB Group, Equity Group, KenGen, EABL, BAT, and Bamburi, as well as futures on the NSE25 Share Index.
The trading fee for single stock futures is 0.17% of the value of trade, while for index futures it is 0.14%. One index point will equate to KSh100 for the NSE25 Share Index futures. For single stocks trading below KSh100, like Safaricom shares, one futures contract will represent 1000 underlying shares. For stocks trading above KSh100, like BAT shares, one futures contract will represent 100 underlying shares.
Investors need not worry about the safety of their investments on the platform. The Exchange has taken steps to safeguard clients' interest by establishing the Settlement Guarantee Fund and the Investor Protection Fund.
The NSE derivatives Market will officially launch on July 11, 2019.
