From left: Bond Market Association newly elected chairman John Mwaniki, head of ESMID Africa Evans Osano and Nigeria dealers association chairman Sola Adegbesan. FILE
Traders in Kenya’s multi-billion- shilling bonds market have formed an umbrella organisation to address issues of transparency and integrity as the dealers eye inclusion in the JP Morgan and Barclays’ emerging market bond indices.
Commercial banks, insurers, fund managers and brokers elected new officials for the Bond Markets Association (BMA) at a meeting held in Nairobi last week.
They agreed on a constitution that guides on a code of conduct for members, manner of trading and how to grow the industry.
“BMA as a self-regulating organisation, will have industry-driven business rules and this will ensure there is an orderly, efficient and transparent bond market not just in Kenya, but for the benefit of the East African region,” said newly-elected BMA chairman John Mwaniki in a statement.
A key goal is to have Kenya included in the JP Morgan and Barclays’ emerging market bond indices which is meant to attract foreign investors similar to the FTSE indices used on the NSE.
The International Finance Corporation (IFC) and the Nigerian Financial Market Dealers Association (FMDA), a self-regulatory licensed by the Nigeria’s regulatory authority are also working with the BMA.
“The Efficient Securities Markets Institutional Development (ESMID) programme aims to facilitate the trading of bonds in Kenya. To this end, we are working on establishing an efficient bond market that will help banks and brokers trade on equal terms, as well as improve transparency and earn investor confidence,” said ESMID Africa head Evans Osano.
ESMID is supported by the World Bank, the IFC’s parent company.
In 2013, the bond market turnover stood at Sh1.1 trillion against Sh86.7 billion traded on the NSE.
“A key consideration for inclusion (in the JP Morgan and Barclays indices) or recognition in any significant global index, would be an active secondary market with depth that allows investors the comfort to enter and exit. Without a vibrant secondary market for long-term securities, long-term funding in an economy would remain stunted,” said Nigeria’s FMDA chairman Sola Adegbesan.
Mr Mwaniki was the head of operations and technology at the Nairobi Securities Exchange (NSE) and has consulted for the Rwandese capital markets, which issued a $400 million 10-year sovereign bond.
The formation of the association also comes at a time when the Treasury is preparing to issue a Sh87 billion ($1 billion) sovereign bond by end of the year.
Participants in the industry are hoping to restore investor confidence which hit the market late last year following allegations of trading in fraudulent bonds worth Sh105 million that were created last year.
The Bond Dealers Association, which was not officially registered, was chaired by blacklisted trader Fred Mweni.
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