Market participants at theNairobi Securities Exchange (NSE) have welcomed a move by the Exchange to introduce day trading as one the ways that will result in higher volumes and position Kenya as one of Africa’s leading financial centers.
On October 26th, the bourse announced that it had received approval from the country’s capital markets regulator (CMA) to launch day trading. The exercise will officially be launched on November 22nd and the exchange expects volumes to more than double at the onset of the program.
According to Nairobi Securities Exchange Head of Operations David Wainaina, the bourse has upgraded its system and all investors who currently have CDS accounts will be able to take part in day trading. Speaking to CGTN, Wainaina noted that they expect to double trading volumes from the current average transaction volumes of 22,600 transactions a month.
“If we follow what has been done in other markets, we have seen markets that have deployed what we have done seeing in excess of 100, 200 folds. We expect anything not short of 50% of our volumes once this takes traction effective November.” he noted during the interview.
Day trading Discount
The NSE has approved an incentive structure whereby investors who participate in day trades will receive a discount on the second leg of the transaction which will be levied at 0.114% compared to normal trades which are levied at 0.12%.
The rollout of day trading will go live on 22nd November 2021 as part of a strategy by the bourse to enhance market liquidity.
Day Trading Example
Day trading is the act of buying and selling stocks within a very short window of time—within minutes or hours—with the aim of making a bunch of small profits that can add up to big gains over time. A day trader might buy a stock at 9:40 a.m., turn around and sell it at 2:30 p.m. that same day, and then do it all over again with another stock.
For instance, on Monday 1st November, shares of Kenya Power rose by as much as 17% during the day’s trading session driven by news that the company reported positive earnings from a massive loss reported in the previous year. Do the math assuming an investor got in the morning and placed a sell order when the share price rose beyond 10% minus brokerage commission of 4.2% (Buy 2.1% and Sell 2.1%)!