NSE’s automated system collapses soon after launch

Mr Mbugua said market players had not yet developed a formula that is acceptable to all for pricing some bonds.

He said there were still differences on how to price the Sh18 billion government infrastructure bond which was floated last year and is to be redeemed beginning the sixth year.

In his address during listing of the KenGen Bond, the NSE chief executive, Mr Peter Mwangi, said the stock exchange had linked its system with those of the Central Bank of Kenya (CBK) and the Central Depository and Settlement Corporation (CDSC) to facilitate the automated trading of bonds.

“From this day forward, all immobilised listed bonds such as the KenGen bond will trade in a fully automated environment, right from the placement of orders, to matching and finally settlement,” said Mr Mwangi.

Early last week the CMA sent letters to the CDSC and the NSE demanding that they address a list of regulatory issues before it could approve live trading of bonds at the stock exchange.

“In approving an automated trading and settlement system for bonds, the authority has to satisfy itself of the integrity of the system by ensuring it fully complies with the Capital Markets Act in consideration of the wide interests of the capital markets,” said the CMA a statement.

But on Monday the NSE said it had addressed all the outstanding issues as demanded by the regulator.

“It is on the basis of our response as NSE that the regulator approved the automated trading,” said the exchange in a statement.

The CMA, however ,did not respond to our queries.

The process of automating trading at the NSE started in 2004, with the first phase being launched in 2006 when automated trading of shares using Central Depository System (CDS) accounts went live.

The 2006 KenGen initial public offering was the first to be floated on the automated trading system for equities.

There was a rapid increase in average equity trade volumes at the stock market since then attributed to transactional efficiency that came with the new system and market players were expecting the trend to reflect in the bond market.

Besides speedy settlements, the new system also promises increased transparency since all investors will have real time access to information on sales volumes and prices.