Full steam ahead for NSE demutualisation

November 16, 2009

, NAIROBI, Kenya Nov 16 – The Capital Markets Authority has revealed that it is preparing a Demutualisation Bill which should be ready by December.

This would set the stage for the demutualisation of the Nairobi Stock Exchange (NSE), which will see it cut links between member brokers and the Exchange.

CMA Chief Executive Officer Stella Kilonzo said they were collaborating with the NSE and Central Bank of Kenya to look at various structures used in the world to come up with a system that works for Kenya.

“We have been looking at the various models of demutualisation and come up with a model that will work for the Kenyan market,” Mrs Kilonzo said.

She stressed the need to sensitize all stakeholders of the bourse, owing to the stake they hold in the exchange to ensure they were all in agreement as the process gathers steam.

A mutual company formed by the stockbrokers currently owns NSE.

Many view the demutualisation as a matter of priority as it would improve business, discipline and governance, while making the NSE a commercially viable entity among other things.

The NSE is currently ranked fifth biggest market in Africa by market capitalization, and it is believed demutualisation would improve this ranking, wooing more investors into the country.

At the same time, Mrs Kilonzo defended slow process of demutualisation arguing that there had to be extensive consultations to ensure the process was as seamless as possible.

“Demutualisation is not something you can wake up one day and in less than one year you have it,” she said.

In Africa, the Johannesburg Stock Exchange (JSE) was the first to demutualise in 2005. The Nigerian Stock Exchanges (NSE) has also established a committee to oversee the processes for possible demutualisation.

The process of demutualisation will involve introduction of new laws and amendment of some existing ones to allow non-brokers to own a stake in the exchange.

The process is also hoped to curb stockbrokers’ influence on NSE\’s management that has been blamed for slow intervention when brokers flout regulations, which will in turn also improve efficiency and transparency.


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