East Africa’s very first Derivatives Market in East Africa, has begun trading at the Nairobi Securities Exchange.
The derivatives market which is the number 2 in Africa will enable investors to diversify their investments, manage risk, and deploy funds more efficiently.
Apart from the numerous benefits to traders, the platform will also position Kenya as a leading financial hub, thus attracting additional international investors.
According to Kenyan Wallstreet, the Derivates Market will consist of a Clearinghouse, Clearing members (which are Banks and Financial Institutions licensed by CBK), Trading members (which are Brokers and Investment Banks), and Clients (which are Institutional and Individual Investors, Speculators, Hedgers, and Arbitrageurs).
The Nairobi based derivatives market will initially offer single stock futures and Index futures as well.
Clients will be able to trade futures on 5 Nairobi Securities Exchange (NSE) listed stocks namely; EABL, Safaricom, KCB Group, Equity Group, and BAT.
The trading fee for single stock futures is 0.17 percent of the value of trade while for index futures is 0.14 percent.
All futures contracts at the Nairobi Securities Exchange (NSE) will be settled using cash in these early stages of trading.
The futures contracts, will expire every three months, on the third Thursday of March, June, September, and December.
To ensure the safety of investments on the platform, the Nairobi Securities Exchange (NSE) has taken steps to safeguard clients’ interests, by establishing the Settlement Guarantee Fund (SGF) and the Investor Protection Fund (IPF).
The Settlement Guarantee Fund (SGF), will be used to meet payments for transactions on the exchange while the Investor Protection Fund (IPF), will settle claims by investors in case the trading members fail to meet their obligations.
While the Nairobi Securities Exchange (NSE) Derivatives Market is already Live, its official launch will be on the 11th of July 2019.
