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Nairobi bourse gets boost as EGM Securities kicks off trading in derivatives

By Christopher Owuor
Wednesday, April 21st, 2021 00:00 | 2 mins read
Nairobi Securities Exchange. Photo/PD/FILE

EGM Securities, Kenya’s first online trading broker, has began offering derivative contracts at the Nairobi Securities Exchange (NSE).

Its move comes barely a week after African Hair Plc which trades as Beauty Click, announced plans to raise equity by listing on the NSE, signalling increased activity at the bourse.

In a statement, EGM Securities, an online broker regulated by the Capital Markets Authority (CMA), said it will initially introduce futures contracts on the six most traded Kenyan stocks.

These are British American Tobacco Kenya, KCB Group Plc, Equity Group Holdings, Safaricom Plc, East African Breweries Plc and Absa Bank Kenya Plc, as well as the NSE 25 Index created to cover 25 of the most liquid and blue-chip stocks in Kenya. 

A derivative refers to a contract between two or more parties whose value is based on an agreed-upon underlying financial asset.

Common underlying instruments include bonds, commodities, currencies, interest rates, market indexes, and stocks. 

The NSE derivatives contracts are based on the most liquid traded equities and index in Kenya. 

“We are very pleased to deliver another innovative and world-class offering to Kenya’s financial markets that enables investors to take quick advantage of intraday trading opportunities on the NSE derivatives markets,” said EGM chief executive, Samwel Kiraka.

He said this will enable traders buy in the morning and sell in the afternoon, across all EGM’s trading platforms including MT4, Webtrader, and FXPesa.

“We are proud to be an Exchange leading in innovation and one of our key priority areas for 2021 is to increase product uptake on the alternative products to our investors,” NSE chief executive, Geoffrey Odundo, said.

Cash equities

The main benefits of trading on the NSE Derivatives Market compared to cash equity equivalent include the ability to short sell Kenyan cash equities, lower margin costs and lower transaction costs at a flat rate of 0.14 per cent.

Investors can protect their portfolios against adverse price movements by trading futures that reflect their stock portfolios.  “We always work to add local products to our global offering.

We are democratising trading for all, giving access to global markets such as US equities and Foreign Exchange (FX) as well as local stocks such as Safaricom.

Kenyans deserve the ability to diversify,” said Brian Myers, the CEO of Equiti Capital, EGM’s parent company.  

Christopher Owuor