Safaricom to host NSE trading infrastructure
Friday, February 12th, 2021
- Capital: Market capitalisation rose by 2.29 per cent from Sh2.3 trillion in December 2020 to Sh2.4 trillion in January 2021.
- Turnover: Equity turnover decreased by 13.5 per cent in January 2021from Sh10.2 billion to Sh8.9 Billion; while bonds turnover decreased by 5.95 per cent from Sh57.9 billion to Sh54.4 billion in comparison to December 2020.
- Growth: The NSE-20 Index grew by 0.72 per cent in January 2021 from December 2020. Safaricom’s stock has been trending upwards from Sh32 last month to Sh36 amidst expectations it will be granted a license to operate in Ethiopia.
Safaricom’s bet on trading infrastructure for the Nairobi Securities Exchange (NSE) has opened a new business frontier which analysts reckon could create more opportunities in the region.
The move comes after NSE announced on Friday that it has shifted from the South Africa’s MTN trading platform to a new one powered by Safaricom.
“Nairobi Securities Exchange successfully transitioned to a new state -of-the-art broker connectivity solution powered by Safaricom as the technology partner.
It will provide higher trading platform availability, ensure higher uptime and performance and increase network security,” the bourse said in its latest market report.
Analysts say the telco is angling for the larger regional markets, especially the planned East African Security Exchange, at a time most exchanges are at the development stage and this could tap technology that cuts costs for brokers.
“They may not get significant income from NSE, but I see this as an entry into a market that could attract other clients such as the expected launch of the East African Securities Exchanges,” said Michael Wakio of Suntra Investment Bank.
Managers of African securities exchanges are in the process of procuring software that will link seven stock markets electronically with a combined market capitalisation of $1.25 trillion (Sh136 trillion) as part of the initial phase of the African Exchanges Linkage Project.
Investment Advisor Ally Khan Satchu said that a lot will depend on geographical expansion and if they enter Ethiopia this might present high level infrastructure connectivity opportunities.
“Not unless they have a physical presence in other markets. I think it’s a progressive development but not necessarily a knock out earnings punch,” he said.
NSE says Safaricom’s internet plan will save stockbrokers up to a third of their costs and offer a secure network for traders with trading platform provides a virtual network software that links traders to the Central Depository and Settlement Corporation (CDSC).
This means that the Multi-Protocol Label Switching network will be replaced with the Software-defined Wide Area Network (SD-WAN) supported by Safaricom.
“The network interconnects the NSE, the Central Depository and Settlement Corporation and all the trading participants in the market to offer higher trading platform availability,” NSE CEO Geoffrey Odundo said.
This means brokers could save about 30 per cent in connectivity costs with higher latency and network security according to the NSE.
The exchange is also working to increase the role of retail investors using decentralised technologies and reduce exposure of foreign risks which is currently over 60 per cent.
While the NSE did not explain in detail how Safaricom will earn from the partnership, however, such platforms make a small percentage from each trade.
Last year perhaps saw the worst for stockbrokers whose revenues have been on the decline over the years hence the need to cut their cost of operations.