Investors in the Nairobi Securities Exchange will soon be able to diversify into a new investment unit known as Exchange Traded Funds.
The Capital Markets Authority, the exchange, the Central Depository and Settlement Corporation and other key stakeholders yesterday unveiled a roadmap to pave the way for the introduction of the new product.
Authority acting chief executive Paul Muthaura said the authority could fast-track the roll-out of new products and services in the capital markets and ensure timely regulatory response to market dynamics.
“The law does not set specific or prescriptive rules on what a market player can or cannot do, but rather sets broad but well-defined principles that they are expected to follow. This is more flexible and promotes innovation,” he added.
The Exchange Traded Funds is an investment unit traded just like the other securities, including stocks. It holds assets such as stocks, commodities, or bonds and typically trades close to its net asset value over the course of the trading day.
The authority, in consultation with key stakeholders, recently developed a guidance note to facilitate the introduction of the Exchange Traded Funds.
The watchdog’s board approved the guidance note, but proposed some amendments to the trading and listing rules that have fully taken into account guidelines on the Exchange Traded Funds trading.
The guidelines, which are the first ever in Kenya, now await the public’s input after which a validation meeting will be held with the stakeholders.
Once this is done, Capital Markets will be able to receive applications from promoters of the Exchange Traded Funds for consideration and final approval.
