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Kenya has finalized plans to launch Derivatives Markets in July

by Ronald Njoroge NAIROBI (Xinhua) -- Kenya has finalized plans to launch the derivatives markets in July, officials said on Wednesday.

Rufus Kariuki, manager of derivatives in the Nairobi Securities Exchange (NSE), told journalists in Nairobi that the contracts to be traded will be based on the NSE 25 Index as well as seven blue chip stocks.

"We also have in place two banks that will act as clearing houses for settling trading accounts and confirming trades in real time," Kariuki said.

Derivatives are financial instruments whose characteristics and value depend upon the characteristics and value of an underlying asset which is typically a commodity, bond, equity or currency.

In May, the Capital Markets Authority gave the NSE regulatory approval to launch the Derivatives markets.

Kariuki said that the derivatives will be settled at the end of each trading day to reduce risk of default by investors.

He noted that there is demand for the product in Kenya because it will enable investors to buy or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from market movements.

In order to operationalize the derivatives markets, the NSE has set aside 130 million shillings (1.27 million U.S. dollars) for the Settlement Guarantee Fund that will insure investors against counterparty default risk.

He added that derivatives markets will help to deepen the capital markets by allowing investors to make returns when the securities markets rise or fall.

He revealed that the trading fees for single stock futures will be 0.17 percent, while fees for index futures will be 0.14 percent on the value traded compared to the trading fees on shares which range between 1 and 2 percent.


Kenya Capital Market Authority and the Kenya Association
of Manufacturers sign 'MoU' to boost manufacturing sector

NAIROBI (Xinhua) -- Kenya’s Capital Market Authority (CMA) and the Kenya Association of Manufacturers (KAM) on Thursday signed a memorandum of understanding (MoU) to boost the manufacturing sector.

CMA CEO Paul Muthaura told a media briefing in Nairobi that capital markets are an alternative source of affordable and long term finance that is largely untapped.

"The agreement will be instrumental in catalyzing policy formulation and product development aimed at fueling the growth of manufacturing through responsive financing through the capital markets industry," Muthaura said.

Through the agreement, the capital market regulator and the manufacturing lobby will collaborate to identify and analyze funding gaps, institutional challenges and key impediments in the manufacturing sector and collaborate on implementing solutions to the same.

"The partnership will enhance our ability to examine the strategies to create a pipeline of issuers of traditional and new capital market products to support manufacturing sector.

"This may include a review and possible revision of existing eligibility and disclosure requirements in order to attract large and family-owned companies as well as small and medium enterprises," he noted.

Muthaura said that the manufacturing sector is a critical industry which needs to be supported by all relevant stakeholders because of the critical role it plays in employment creation.

Phyllis Wakiaga CEO of KAM said that the partnership will have a reverberating effect throughout industry and respective value chains for years to come.

"This collaboration also comes at a time when manufacturing has been identified as a key pillar in the economic agenda of the country and will be a catalyst towards increasing the gross domestic product contribution of the sector from the current 7.7 percent to 15 percent by the year 2022," Wakiaga said.

Kenya keen to broaden co-operation with China
over financial technology development

NAIROBI (Xinhua) -- Kenya and China’s capital market regulators are set to hold discussions on how financial technology (fintech) can help accelerate economic development in Kenya, an official said Thursday.

Paul Muthaura, chief executive officer of Capital Market Authority (CMA) told Xinhua in Nairobi that Beijing has the largest and most vibrant technology driven financial sector in the world.

"Kenya is keen to exchange ideas with China from a regulatory perspective on how to create a conducive environment for the accelerated development of the fintech sector so that it becomes a catalyst of economic growth," Muthaura said on the sidelines of the signing ceremony of the memorandum of understanding (MoU) between CMA and the Kenya Association of Manufacturers (KAM).

Early this week, financial sectors regulators from China and Kenya held fruitful talks in Nairobi on cooperation in the fintech sector.

Muthaura said that in September, a team from CMA is expected to visit China to hold talks with their Chinese counterparts on partnering on the fintech sector.

He said that Kenya is keen to borrow lessons from China on how it can deepen and broaden its capital markets by leapfroging through the use of technology.

He revealed that China is a role model in the area of fintech because the Asian nation has used technology to democratize access to financial services and has also identified how wider sectors of the economy can be supported by technology.

He noted that China has an interesting regulatory model in the fintech space where there is industry self regulation with the participation of policy makers and regulatory agencies.

According to Muthaura, most of the fintech solutions in Kenya have components that fall under the regulators of the insurance, pension, banking sectors.

The capital market regulator is keen to deploy a broad based approach to the management of fintech solutions due to the presence of different sectoral regulators and there is currently not single voice in the fintech sector.



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