KCB investment arm joins list of lenders seeking trading licence

Newly licensed investment bank KCB Capital plans to seek a trading licence at the Nairobi Securities Exchange (NSE) this year, making it the latest lender to seek a slice of the commission business.

Demutualisation of the exchange — separation of ownership from trading rights — has made it easier for new intermediaries to access the trade floor bringing increased competition to stockbrokers and investment banks.

“At some point we would be looking to participate at the NSE. No application has been made yet but it is something we are looking to do sometime this year.

‘‘We will review the options available to us and make the right choice to be communicated later in the year,” said KCB in an email reply to the Business Daily.

Trading rights limited

In the past, trading rights were limited to members of the exchange, who were stockbrokers holding ‘‘seats’’ or shareholding of the bourse.
KCB Capital’s performance would be limited without a presence at the NSE where it is looking to engage in Real Estate Investment Trusts (Reits) and the Growth and Emerging Markets (Gem) segment.

KCB Group chief finance officer Collins Otiwu said last week that the lender’s quest for a seat at the bourse was dropped because of the high selling price.

“The prices are hefty at Sh150 million to Sh250 million, we believe given the value we are bringing to the market there should be a trade-off,” said Mr Otiwu.

KCB is following in the path of Equity Bank and Commercial Bank of Africa whose subsidiaries — Equity Investment Bank and CBA Capital respectively — secured trading rights at the bourse in August last year.

READ: KCB makes comeback to the capital markets

Licensed investment banks only need apply for trading rights to the NSE on the strength of their licence and to pay the fees.

“Buying a seat is not a necessity,” said NSE Marketing and Product Development Manager Donald Ouma. The exchange has submitted a new licence fee structure to the Capital Markets Authority for approval.

Acquisition of trading rights enables investment banks to sidestep middlemen — mostly brokers — who handle their transactions at a fee.

Control of admission of new trading participants was last year a point of divergence between the NSE and CMA, played out through their proposals on the Capital Markets (Amendment) Bill 2013.

CMA proposed amendments to have NSE compelled to admit all trading applicants satisfying conditions set by the authority.

However, NSE in its proposals before the Finance, Planning and Trade Committee of the National Assembly sought to retain full control of licensing trading participants.