Nairobi bourse gets nod to set up futures market

Kenya’s plans to operate a futures and derivatives market to manage price movements on commodities, currencies and interest rates have moved a notch higher following the approval of the proposal by the capital markets regulator, five years after the idea was mooted by the government.

The Capital Markets Authority (CMA) has officially given the Nairobi Securities Exchange (NSE) a green light to set up the market that will cushion investors against price fluctuations on commodities, minerals and currencies.

In a statement, the NSE chief executive Geoffrey Odundo said the derivatives market would help mitigate against risks associated with volatility in asset prices.

“The approval of the Futures Exchange marks a great milestone for the financial markets in East and Central Africa. This is a firm commitment towards deepening of our capital markets,” said Mr Odundo.

Following the approval, the Kenyan bourse is now in the process of finalising the membership of market participants (clearing and trading members) and ongoing regulatory requirements while enhancing industry and investor awareness on the products to be rolled out.

“Subsequently the Exchange will announce the Derivatives Market launch date shortly thereafter,” said Mr Odundo.

Globally, there has been significant growth in the volumes of exchange traded derivative contracts in currency, equities, debt and other asset classes mainly due to increased transparency, accessibility, growing economies and efficiency over other market segments.