Friday, March 29, 2024

Kenyans to borrow and lend each other shares on NSE

Kenyans will now be able to borrow and lend each other shares on the Nairobi Securities Exchange (NSE) from June this year.

This follows the installment of an upgrade system that will facilitate this new investment feature. The upgrade will take five months.

Treasury CS Henry Rotich gazetted the rules allowing the securities lending and short selling at the end of November.

“We are upgrading our systems to allow the securities lending and borrowing framework to work… that should be coming onstream possibly in the second quarter of this year,” said NSE chief executive officer Geoffrey Odundo. “The stock exchange is betting on the securities lending framework to improve liquidity in the market, unlocking for regular trading the millions of shares held by long-term investors.”

The regulations require that the borrower deposit with the lender a collateral equivalent to 100 per cent the value of the securities being borrowed, and in some cases the lender is allowed to ask for a higher value. The collateral will also be adjusted regularly to match any increase in the value of the borrowed security.

This form of trading will be a first in Kenya. It’s biggest risk will be the danger of stock manipulation by investors keen to benefit from a price fall and aggressive speculation.

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