State-run Kenya Electricity Generating Company (KenGen ) #ticker:KEGN and Bamburi Cement #ticker:BAMB have been excluded from futures trading which went live Thursday after failing the minimum capitalisation test.
Bamburi’s highest market valuation in the past year was Sh67.87 billion while KenGen hit a high of Sh49.46 billion.
The trade in quarterly futures contract on the two initial target stocks has been put on hold because their market valuation has fallen below Sh50 billion minimum requirement for participating on Nairobi Securities Exchange’s (NSE’s) Derivatives Market.
KenGen’s valuation stood at Sh39.04 billion on Wednesday while that of Bamburi was Sh41.38 billion, well below the requirements for Nairobi’s futures market, the Next.
That has left investors with a choice of five liquid stocks among the 25 blue-chip publicly traded firms which form the NSE 25 share index that was launched in October 2015 specifically for the derivatives market.
The five single counters on which investors will enter into contracts to buy shares at a particular price at a specific future date are Safaricom #ticker:SCOM, valued at nearly Sh1.13 trillion on Wednesday, East African Breweries #ticker:EABL (Sh155.78 billion), Equity #ticker:EQTY (Sh149.25 billion), KCB #ticker:KCB (Sh120.95 billion) and BAT #ticker:BAT (Sh50.6 billion).
Besides the capitalisation requirement, the NSE trading rules for derivatives also require participating single stocks to have a minimum average daily turnover of Sh7 million over the six months before review.
“All futures contracts listed on Next will have quarterly expiry dates; this will be the third Thursday of March, June, September and December of every year. All Next futures contracts will initially be cash settled,” NSE chief executive Geoffrey Odundo said in a statement Thursday.
The contracts will be tapped by individual and institutional investors looking to better manage risks, hedge, arbitrage and speculate over the future value of the participating stocks and the index. Trading fees have been pegged at 0.17 percent of the total value for single stock futures and 0.14 percent for index derivatives.