Stock market deal with FTSE boosts data trade

The Nairobi Stock Exchange has signed an agreement with global market performance tracking company—FTSE—that will see the bourse gain new revenues by selling data to international investors, and spur more foreign investor interest.

Under the agreement that is still in the development stage, FTSE International and the NSE will create new FTSE/NSE share and bond indexes that will be marketed to millions of international investors who monitor FTSE indices around the world.

The partnership is expected to open new income streams for the bourse through selling of premium market data to investors, while local buyers are likely to benefit from higher liquidity that comes with more exposure to international buyers.

“We believe this partnership will lay the foundation for the creation of data products, electronic traded funds (ETFs) and other index based products and will further attract enhanced foreign investment in the local market,” said Terrence Adembesa, product development manager at the NSE.

News of the partnership comes days after the bourse said it was in the process of introducing a local bond index to track performance of fixed income securities.

The NSE said the new bond index will be initially constituted of treasury bonds.

FTSE Group is involved in the creation and management of over 120,000 equity, bond and alternative asset class indices according to information on its official website.

The firm is jointly owned by the London Stock Exchange and the Financial Times, and its indices are used by a range of investors such as consultants, asset owners, fund managers, investment banks, stock exchanges and brokers.

Mr Adembesa said the indices — which are expected to come into the market in the third quarter of this year— would also help diversify the NSE’s revenue streams and enhance the value of the bourse’s brand internationally.

“The agreements have been firmed up within the technical teams for both FTSE and NSE and are awaiting board approvals,” said Mr Adembesa at the NSE adding that finer modalities on the equity and bond index constituents, weighting and calculation is still being worked out.

The NSE said they were considering developing the bond index, an equity index, equity sectoral and finally shariah index series.

Mr Adembesa said they hoped the partnership would work towards developing an East African index series as well while maintaining the NSE 20 share and NSE All Share indices.

Volatility of the market has seen financial performance of the stock exchange fluctuate in recent years, making it necessary for the bourse to create new income streams.

The NSE made a Sh35.8 million loss after tax for the year ended December 2009 compared to a Sh59 million profit after tax for a similar period ended December 2008.