NSE looks to self-regulation rules for high efficiency

The Nairobi Securities Exchange will be allowed to regulate itself, giving it powers to approve some listings and set market fees.

Capital Markets Authority (CMA) chairman Kung’u Gatabaki said on Monday that self-regulation combined with the planned demutualisation of the bourse would enhance efficiency as Kenya seeks to position itself as the market of choice for issuers and investors eyeing East and Central Africa.

“As a self-regulating organisation, the NSE will have powers to create and enforce industry regulations and standards with the core objective of protecting investors through rules that promote ethics and equality,” said Mr Gatabaki during the launch of NSE’s new brand identity and exchange building.

NSE’s head of market and product development Donald Ouma said the new regime had already started in relation to listing on the growth and small enterprises market segment (GEMS).

“On GEMS, if a company is not raising capital, the exchange approves its listing statement. We are still negotiating other responsibilities with the regulator,” said Mr Ouma.

READ: NSE targets self-listing of shares by June

In its 10-year master plan due for launch soon, CMA has set the bourse a target of listing at least three to four new GEMS listings per year, with a total of 39 expected to be listed by 2023.

GEMS listings, according to CMA, will be the launching pad for future main board flotation.

The master plan also proposes that once the NSE has fully demutualised, it should be given the authority to set its own fees so that it can obtain and allocate the resources it needs to rapidly respond to market developments and opportunities.

This proposal marks an about-turn for CMA which in the Amendment Bill 2013, the regulator said the exchange should not be allowed to set its own fees as this could be abused. CMA, however, insists that the fee structure be transparent so that market participants know the cost of such a venture.

With the exchange rebranding, its chairman Eddy Njoroge said that its listing will be done through an Initial Public Offering (IPO) by end of June. The NSE board has already appointed transaction advisers for the self-listing led by Standard Investment Bank and Renaissance Capital.

Mr Njoroge said the NSE had submitted its final application for demutualisation to the regulator.

“After long negotiations with the existing shareholders, we agreed to allocate 10 per cent of the shares to the government through the Treasury and the Investor Compensation Fund,” said Mr Njoroge.

The Treasury’s insistence that it would not cede its 20 per cent ownership of the bourse as requested by stockbrokers was a key sticking point that led to delays in demutualisation.