This archive report was first published on 28 October 2019.
The Nairobi Securities Exchange (NSE) has been struggling to overcome teething problems with its new Automated Trading System (ATS), which was installed on October 14, 2019.
According to sources, the new system has been plagued by logistical nightmares and a lack of preparedness by the Central Depository and Settlement Corporation (CDSC) to handle the new infrastructure.
Industry insiders have pointed out that the decoupling of CDSC and the NSE has resulted in the two platforms functioning independently of each other, leading to issues with the seamless linking of the refurbished trading platform to the back office of brokers.
Figures indicate that three days after the new trading system went live, Equity Turnover rose from Sh 361 million to Sh 1.9 billion, an increase of 449 per cent. Market capitalization increased from Sh 2.2 trillion to Sh 2.24 trillion.
However, the improved performance at the NSE has been attributed to investor reactions to the possibility of parliament scrapping the rate cap law, following reservations expressed by President Uhuru Kenyatta in a memorandum to parliament.
Geoffrey Odundo, NSE Chief Executive Officer, attributed the improved trading performance to enhancements done on the infrastructure to support the uptake of more products, including trading through the mobile phone.
But a section of stockbrokers said it is the strong interest in banking stocks that have fueled activity at the NSE and not the new trading platform.
On October 22, 2019, a meeting was held at the NSE trading floor to iron out teething problems facing the new trading platforms. The meeting was attended by representatives from NSE, Capital Markets Authority, CDSC, fund managers, registrars, and trading participants.
Market participants have raised concerns about the slow process of opening CDS accounts, with stockbrokers saying that the manual process used by the CDSC is hurting their business.
Reports indicate that in the past week, there are stockbrokers who receive the settlement file six hours after trading has closed, implying that it now takes longer to conclude a transaction.
Willy Njoroge, Chief Executive of Kenya Association of Stockbrokers and Investment Banks (KASIB), said that the new trading infrastructure at the NSE will enable features that were not available previously, such as short selling, securities lending and borrowing, and intraday trading.
