A customers peruses exchange rates at a Nairobi forex bureau. Traders cannot tell what the trading level of the Kenya shilling is at any particular time because the system is not transparent. Photo/SALATON NJAU
What you need to know:
Thomson Reuters wins tenders to provide reference exchange rates for for Kenyan, Ghanaian and Zambian currencies.
The automated online board, similar to the NSE’s, will for the first time see currency bids and quotes displayed in the open.
For currency traders this means prices will be updated automatically with bids and quotes for the currencies against international counterparts displayed.
Reuters has won competitive tenders to provide reference exchange rates for Kenyan, Ghanaian and Zambian currencies in a move set to enhance price transparency.
The automated online board, similar to the NSE’s, will for the first time see currency bids and quotes displayed in the open.
For currency traders this means prices will be updated automatically with bids and quotes for the currencies against international counterparts displayed.
The benchmarking is expected to ease trading and reduce related costs, currently involving calling people in banks and forex bureaus to establish the position of the local currency against foreign ones.
Since the new move will make currency values information automatically available online for subscribers similar to stock prices, market players said they expected this to improve the speed of converting the local currency and benefit international trade.
Even individuals or companies actively seeking forex frequently may be able to access the system and negotiate rates for their holdings.
These would mainly be traders in the export and import businesses.
“We expect that this will make trade easier. It will be more transparent unlike now when price discovery is more difficult. I expect that trade in the currencies involved will improve,” said Andlip Nazir, senior trader at I&M Bank.
Mr Nazir said provision of analysis would further help stabilise the currencies in question. Traders are, however, yet to get details of the programme which kicks off with manual quotes from 10 traders.
In the current system, traders cannot tell what the trading level of the Kenya shilling is at any particular time because the system is not transparent and deals are cut over the counter.
It is impossible to tell what the bids and quotes for Kenya currency against the other currencies are.
Evaluating performance
“Thomson Reuters... has won a competitive process to provide currency benchmarks for three of Africa’s most vibrant and dynamic economies — Kenya, Ghana and Zambia,” the global financial information provider’s head of corporate communications and public relations, Mr Tarek Fleihan, said in a statement issued from South Africa.
The benchmark has been established similar to the way stock exchange average prices are reached with bids, quotes and prices displayed on a continuous basis.
It may not represent any person’s position, but is a reference point when evaluating performance of a portfolio of the local unit in the case of Kenya.
“Starting this week (we) will operate currency benchmarks for the Kenyan shilling, Ghanaian cedi and Zambian kwacha, beginning a process which will see the benchmarks move from a manual telephone-based system to a state-of-the-art automated analysis, ensuring the integrity and transparency of the rates,” said Thomson Reuters in the statement.
Quotes and bids will be visible to traders linked to the online platform, making it more difficult to have wide fluctuations in trading positions.
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Note: The results are not exact but very close to the actual.
