Kenya’s first derivatives market got a boost after The Nairobi Securities Exchange (NSE) yesterday signed up six Banks who will act as clearing members in readiness for the Derivatives Market. The six Clearing members already signed up include Barclays Bank of Kenya, the Co-operative Bank of Kenya, CFC Stanbic Bank, NIC Bank, Chase Bank and CBA Bank with a number of other banks slated to sign up in the near future.
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The clearing members will be responsible for settling trading accounts,clearing trades, collecting cash margins & reporting trading data on behalf of the NSE.
These derivative instruments will initially include stock index and currency futures and will serve to deepen liquidity in the Kenyan markets expanding the Exchange’s product offering. The NSE Derivatives Market, which recently got approval from the Capital Markets Authority(CMA), will allow Exchange Traded Derivatives based on a variety of underlying financial instruments including currencies and equities.
Speaking during the announcement, Mr. Geoffrey Odundo, Chief Executive, Nairobi Securities Exchange said “The global practice has been to move to a system of central counterparty (CCP) clearing and reporting, as exemplified by the European Market Infrastructure Regulations’ (EMIR) latest guidelines. In addition to requiring central clearing of standardized Over-the-Counter derivatives which was previously not the practice, EMIR introduced several other measures to reduce counterparty risk, a key issue that caused contagion in the last Global Financial crisis”. He added “Since the NSE Derivatives contracts will be exchange traded, Clearing members will be essential constituents of the central counter party (CCP) clearing ecosystem. We have been working closely with all our partners and we appreciate their efforts to become operationally ready for the launch of the Derivatives market. It is very encouraging to see that investors will soon start trading and clearing derivative securities through the NSE”.