NAIROBI, Kenya Nov 27 – The Nairobi Stock Exchange (NSE) on Friday incorporated Government Bonds into the Automated Trading System (ATS).
This follows the successful implementation of ATS on November 9 with KenGen’s Infrastructure Bond being the first to be electronically traded.
The first day of trading the government bonds saw bonds worth Sh100 million being traded. In total bonds worth Sh149 million have been transacted through the automated trading platform, with KenGen constituting the remaining Sh49 million.
NSE Chief Executive Peter Mwangi said the automated trading of government bonds marked a significant step in efforts by the bourse and Central Bank of Kenya (CBK) towards creating depth in the capital markets by enhancing the amount of liquidity.
Mr Mwangi added the new development would help investors make informed decisions by having real time information on the market.
“Markets thrive on having readily available and accurate information and automation will thus address this information asymmetry,” he said.
A number of brokers welcomed the latest development owing to the increasing interest in the bond market. Amish Gupta, an Associate Director with Standard Investment Bank, said it marked the second phase of transforming the bonds market which would lead to an increase of bond trades in the coming weeks.
However, Mr Gupta called for a stringent application of rules and regulation as the system continues to take more bonds.
“As players in the market, we will simultaneously be analysing the system to ensure it remains robust and is able to handle numerous transactions in one go,” he said.
Tsavo Securities Managing Director Fred Mweni called on the industry regulator Capital Markets Authority, to increase the number of hours of bond trading as they look to trade bonds worth Sh1 trillion a day.
The NSE trading platform is linked directly to the Central Bank of Kenya’s (CBK) Central Depository (CDS), which facilitates the uploading of government bond securities electronically to the ATS.
This automation has been greatly facilitated by the regulator, through granting of the necessary approvals.
The benefits of an automated trading platform are the creation of liquidity, which is the ability to buy and sell quickly and also to do this at a known objective market price, which was a challenge in the manual trading environment.
Thus, through trading bonds via the ATS, it is possible to accurately determine the supply and demand. This then facilitates price discovery in the market and gives those who are trading confidence in that they are getting the best available objective price.
This transparency then creates a continuous flow of real time data, which is then analysed and feeds back to further inform the market.
Settlement cycles can also now be guaranteed at T + 3 for both corporate bonds government bonds.
The NSE will continue to work with market players towards the continual review and improvement of automated trading environment to facilitate secure and efficient trading.