Kenya moves closer to securities lending platform after successful trials


Capital markets

Kenya moves closer to securities lending platform after successful trials


Nairobi Stock Exchange trading room. FILE PHOTO | NMG

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Summary

  • The proposed Nairobi Stock Exchange (NSE) securities lending and borrowing launch has come closer after the Central Depository and Securities Corporation (CDSC) successfully completed testing of the lending platform.
  • Securities Lending and Borrowing (SLB) is the temporary transfer of shares from one party (the lender) to another (the borrower) for an agreed lending/borrowing fee, with a formal agreement to return the securities either on demand or at a future price. previously agreed date.

The proposed launch of Nairobi Stock Exchange (NSE) securities lending and borrowing #ticker:NSE has come closer after the Central Depository and Securities Corporation (CDSC) successfully completed testing of the trading platform. ready.

The CDSC tested the platform on the Regulatory Sandbox operated by the Capital Markets Authority (CMA), and at the same time developed rules to guide the process once it goes live.

Securities Lending and Borrowing (SLB) is the temporary transfer of shares from one party (the lender) to another (the borrower) for an agreed lending/borrowing fee, with a formal agreement to return the securities either on demand or at a future price. previously agreed date.

The CDSC is the central counterparty that will guarantee the settlement of all lending and borrowing transactions.

“The CDSC has successfully tested screen-based SLB and is ready to exit the sandbox. The company has since submitted rules relating to the operation of the platform which are currently under review by the Authority,” the AMC said.

The CMA said CDSC’s on-screen platform will see the lender contact an SLB agent and issue securities to the agent to lend or borrow on their behalf.

Main beneficiaries

The agent then places the information on the CDSC system allowing borrowers and lenders to have a central platform where they can borrow and lend to facilitate transactions.

Trading should benefit institutional investors such as pension funds that hold a significant portion of their portfolio in equities and individual investors with long-term investment strategies.

They can earn fees by lending their unused securities and use the proceeds to offset costs associated with maintaining their portfolio, such as custody fees.

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