This archive report was first published on 21 July 2019.
On July 4, 2019, Kenya's National Securities Exchange (NSE) launched its derivatives market, offering index futures and single stock futures on the most heavily traded companies.
According to data from the NSE, Sterling Capital topped the list, trading contracts worth Sh940,000, while Standard Investment Bank closed deals worth Sh427,417 from July 4 to July 15.
The derivatives market allows investors to bet on whether a share will rise or fall in coming weeks, with a deposit of between eight and 12 per cent of the value of shares attached to a contract.
Investors who bet on a share rising and it increases get refunded their deposit and a margin of the rise in the shares attached to their contracts.
On the other hand, those who bet the stock would fall and it increases lose the margin equivalent to their bet price and the appreciated stock price, which is normally recovered from the deposit.
Other brokers who handled smaller contracts include Kingdom Securities, Genghis, and AIB Capital.
Market participants said the futures contracts will allow investors to diversify their portfolios and deploy capital more efficiently.
The NSE is the second exchange in Sub-Sahara after Johannesburg to launch trading in derivatives.
