Nairobi Securities Exchange (NSE) shareholders Thursday approved the issuance of bonus shares that increased the paid-up capital to Sh1 billion, thereby meeting the regulator’s threshold to operate a derivatives market.
The NSE had a paid-up capital of Sh778 million which will be pushed to slightly more than Sh1 billion by the bonus share issue valued at Sh259.5 billion that will now capitalise the company’s reserves.
NSE chief executive Geoffrey Odundo said the derivatives market, which would allow investors to hedge against price shocks, would go live before the end of the year.
“When we approached the CMA (Capital Markets Authority) in 2014 to express our interest to set up the derivative market, they wanted us to raise Sh2 billion but we applied for a waiver and they agreed that we could increase our paid-up capital to Sh1 billion in three years,” he said.
Mr Odundo said the move to approve the bonus share issue was meant to preempt the regulator which had set the deadline as January 2017.
During the same annual general meeting, the shareholders also approved the increase of authorised share capital from Sh850 million to Sh1.5 billion by creating an extra shares, but only Sh1.037 billion will be paid-up share capital after shareholders approved the bonus issue.
This means only the issued shares will be listed on the NSE while the rest can be issued in future.
The market will enable dealers in shares and currencies to enter into binding contracts for buying or selling the units at a specified price and time in future, helping them better manage risks, hedge, arbitrage and speculate over their future value.
“For the first time Kenyans will be able to protect the value of their exports by buying the instruments to hedge against currency volatility or own assets that they cannot buy because of huge costs,” Mr Odundo said.
The Nairobi bourse has appointed Chella Software to implement the Broker Back Office for 14 brokerage firms in the country in preparation for the launch.
The system will be implemented on a centrally hosted model for 10 firms and on an on-premise installation for four brokers.
Mr Odundo said Chella Software has a one-year consulting contract because the bourse needs the additional support to install the new product.
The NSE had planned to bring the derivative trading online last year but was, however, hit by delays that saw the bourse move it to March, this month and now later in the year.
NSE got a licence to operate the segment in October last year as part of diversifying its products and Mr Odundo says a lot of back office work has been going on to date.
Meanwhile, five people have offered themselves for directorship appointment at the NSE board.
There were three openings after the current chairman Eddy Njoroge quit the board Thursday while two directors are up for rotation.
The two, Ms Sharon Maviala and Mr Hosea Kili are squaring it out with founding Dean of Strathmore Business School George Njenga, former chair of Kenya Re-Insurance Nelius Kariuki and general manager for business development at Chinese metals and minerals company TNG Ltd Paul Vollant.