The Central Bank of Kenya (CBK) will cease paying commissions to licensed securities dealers, stock brokers and custodian banks starting September – just a year after the launch of the DhowCSD platform.
- While the electronic system has streamlined the bidding process, the halt is a blow to revenues minted by stock brokers and custodian banks on the commissions.
- The CBK has been paying agents a 0.15 percent commission of the value of securities they sell on their behalf, net of 5 percent withholding tax.
- The DhowCSD platform debuted on 31st July 2023, ending the previous manual system that required placing and paying of bids at the CBK.
“Licensed placing agents will not be paid commission from 2nd September 2024.” CBK said in a recent prospectus of the 17-year infrastructure bond tap sale which allows bidding until August 29th 2024.
The DhowCSD enables ordinary individual investors to open and operate CSD accounts from the comfort of their devices and without having to undertake a physical visit to the Central Bank of Kenya.
“The DhowCSD serves to facilitate the trading of Kenya Government securities locally and across the border, while facilitating the integration of Kenya with international financial markets,” Governor Dr. Kamau Thugge said after the platform was named the winner of Central Banking’s Payments and Market Infrastructure Initiative Award in March 2024.
Before the platform, placing agents or bond buyers needed to fill out manual bid forms and deposit them at CBK offices and branches with payments via cheques, bank transfers or over the counter. Foreign investors had to use local agents while institutional investors preferred stock brokers and custodian banks to handle their deals.
Investors will however still pay the commissions applicable in the respective trades and have a choice of using the DhowCSD or the placing agents.
