4.1: Enhance securities markets

Measurement
  • NSE to develop rules and contracts for market making with the broking community.
  • CMA to approve rules for market making and to introduce any necessary regulations and guidelines.
  • NSE to make any necessary changes to trading and surveillance systems.
  • NSE to contract market making services with brokers.
Working Group
Achievement

NSE rules were amended in June 2016 to allow market making in the equities market.

Status
Completed
Measurement
BMA & CBK to develop rules and contracts for market making CMA to approve rules for market making and to introduce any necessary regulations and guidelines.
Working Group
Achievement

Draft SLB regulations finalized and approved by the Board in July 2017 and were progressed to the Attorney for gazettement in August 2017. These are expected to support implementation of market making.

Draft regional framework (Code of Conduct and Guidelines) for Government Securities Market Makers (GSMMs) developed in March 2017 by the Regional Technical Working Group and considered by the Monetraty Affairs Committee (MAC) in August 2017. A subsequent meeting of the RTWG will be convened in January 2018 to develop appropriate methodologies for implementing the Code and Guidelines.

The National Treasury is leading this initiative on Market Making as part of the 7 point plan on Government Bond Market Reforms. Through the Bond Market Association (BMA) the industry has agreed to adopt the Global Master Repo Agreement 2011 and is in the process of finalizing a Kenyan Annex to the GMRA. Also through the Bond Market Steering Committee (BMSC) the industry is in the process of implementing an OTC trading platform which will have capabilities for two-way quotes and trade reporting and BMA has developed draft rules which are under review.

The SLB regulations were gazetted on 12th January 2018. These are expected to support market making for the government bond market.

Status
In Progress
Measurement
CMA to draft regulations allowing for short selling.
Working Group
Achievement

Draft SLB and Short Selling regulations finalized and approved by the Authority's Board in July 2017 and have been progressed to the National Treasury for gazettement.

The SLB and Short selling regulations were gazetted on 12th January 2018. 

Status
In progress
Measurement
CMA to develop regulations to allow for SLB.
Working Group
Achievement

Draft SLB regulations finalized and approved by the Board in July 2017 and have been progressed to the National Treasury for gazettement.

The SLB and Short selling regulations were gazetted on 12th January 2018.

Status
In progress
Measurement
IRA, RBA and CBK to consult with regulated firms on SLB. IRA, RBA and CBK to make changes to its investment guidelines to permit SLB.
Working Group
Achievement

Consultations to be undertaken once the SLB Regulations are gazetted.

Following the gazettement of the SLB Regulations, the Authority is to commence engagement with the Regulators in the last quarter of FY 2017/2018.

Status
Time bad
Measurement
CDSC to put the necessary technical arrangements in place to support SLB. CDSC to develop the rules, procedures and contracts needed to support SLB. CMA to approve rules and procedures for SLB.
Working Group
Achievement

CDSC have submitted the draft operational guidelines for Securities Lending and Borrowing to the Authority in June 2017.
To be reviewed once the SLB regulations are gazetted.

Engagements are ongoing on CDSC SLB Rules.

Status
In Progress
Measurement
CMA to consult on removing requirement for pre-funding. CMA to develop and implement updated regulations. NSE to change rules. CDSC to change rules and practices.
Working Group
Achievement

CDSC has made consolidated amendments to its procedures this year 2017 to remove the requirement for pre-validation of funds and awaiting approval from the Authority.
CDSC and NSE modernisaton currently on going.

Status
In Progress
Measurement
NSE to change and publish rules. NSE promotes DMA to its member firms.
Working Group
Achievement

The Authority developed the draft policy framework on DMA in July 2017 and the NSE has submitted its rules for approval in the next board meeting. Detailed guidelines on operationalisation of DMA to be submitted by NSE.

The DMA operationalization guidelines have been submitted by NSE to the Authority and are currently under review.

Status
In Progress
Measurement
CMA to implement rule changes allowing block trading
Working Group
Achievement

A concept paper on block trading to guide stakeholder consultations was developed in March 2017.
Stakeholder consultation meeting (which comprises of members of working group 2&3) was held in September 2017.
Stakeholder engagment with Fund Managers Association and KASIB to be held in January 2018.
The 2nd stakeholder engagement with fund managers and KASIB was held in February 2018.

Following stakeholder engagements, the market participants were of the view that re-introduction of block trading was not feasible due to the low liquidity levels in the market. The activity has been reprioritized until high levels of liquidity are realized through operationalization of Securities Lending and Short Selling. 

Status
Time bad
Measurement
CMA to determine requirements for the platform. CMA to issue RFP and choose system. CMA to implement system.
Working Group
Achievement

The process to setup an SRO as a market organiser is ongoing and the OTC Link Plc was registered on 10th August 2017.
Draft OTC rules under stakeholder consultation which will inform the Trade Reporting System specifications.
A consultancy has been undertaken for review of legal framework to support insolvency netoff and settlement finality and a final report submitted to the Authority in September 2017.
The report recommended amendments to the Capital Markets Act, Kenya Deposit Insurance Act, Insolvency Act, Insurance Act and the Central Bank Act. The ammendments are to be effected by June 2018.

A Hybrid Bond Market consultant on boarded to support the Authority in developing the regulations, rules and  operational guidelines to support effective and transparent bond trading operations. The Consultants have submitted the draft inception report and feedback given by the Authority.  On the other hand, Kenya Bankers Association in partnership with FSDA is in the process of developing a business plan for the SRO (Market Organizer).

Status
In Progress
Measurement
NT through CBK to make changes to law and regulations to allow for primary dealers. NT to publish procedures for the operation of a primary dealer arrangement. NT to approve primary dealers.
Working Group
Achievement

This is yet to be commenced.

Status
Not Started
Measurement
NSE to promote benefits to investment banks. Investment banks create necessary DRs. CMA/NSE approves DRs for listing.
Working Group
Achievement

A PGN developed and published in July 2017. NSE to commence engagement with potential issuers.

Status
In Progress
Measurement
NSE and its member firms to draw up rules and procedures for margin trading. CMA to create the necessary regulations and guidelines to allow for margin trading. NSE/CMA/CDSC develop tools for monitoring extent of margin trading for supervisory purposes.
Working Group
Achievement

Has been reprioritised awaiting implementation of SLB.

Status
Not Started
Measurement
NSE to finalise self-listing.
Working Group
Achievement

NSE demuatilised and self listed on 9th September 2014.

Status
Completed
Measurement
NSE to review options and undertake the necessary branding exercise.
Working Group
Achievement

The new brand of NSE was launched on April 7th 2014.

Status
Completed
Measurement
CMA to draft the necessary changes to its regulations and obtain Treasury approval to implement the same, subject to competition and consumer protection controls.
Working Group
Achievement

The Authority is currently developing a paper for consideration by the National Treasury in Q1 2018.

Status
Time bad
Measurement
CMA to review its approval procedures and modify as necessary.
Working Group
Achievement

All approval processes by the Authority have been streamlined and requirements published on the website for transparency since 2013.

Status
Completed
Measurement
NSE to publish non-discriminatory admission criteria CMA to approve admission criteria.
Working Group
Achievement

Trading participants access fees to NSE platform reduced from 250 million to 25 million in 2014.
Trading participant rules put in place with effect from June 2014 to provide an admission criteria for admission of new participants.

Status
Completed
Measurement
CMA to coordinate an education program with NSE and KASIB NSE & KASIB to promote the program to their members Members of NSE & KASIB to educate potential companies.
Working Group
Achievement

The Authority in collaboration with the industry organised the first business incubator and accelarator on the listing experience in March 2017 and has identified 40 potential issuers.
The Authority is in continous engament with the idenfied potential issuers.

Status
In Progress
Measurement
CMA to ensure potential companies for listing, advisors and intermediaries know about the streamlined application procedure.
Working Group
Achievement

The listing application procedure was published on the website in 2013.

Status
Completed
Measurement
CMA to consult with the industry on changes required. CMA to propose changes to the Solicitor General. Solicitor General to implement changes.
Working Group
Achievement

The Companies (Ammendment) Act No. 28 of 2017 is in place which has made registration of companies more efficient and streamlines obligations of listed companies.
Below are some of the changes made by the Act:

  • It extends the meaning of a beneficial owner to a natural person who ultimately owns or controls a legal person or a natural person on whose behalf a transaction is conducted and includes those persons who exercise ultimate effective control over a legal person or arrangement and
  • It provides for striking of companies from the registrar in cases where a company violates directions given where it bears a name similar to an existing one.

Status
Completed
Measurement
CMA to initiate debate on the matter. CMA to draft law changes. CMA to implement regulations following law change.
Working Group
Achievement

The Capital Markets (Foreign Investors ) regulations was revised vide Legal Notice no. 134 of 2015 to remove the cap with the Cabinet Secretary having discretion to prescribe caps on companies deemed to be of national strategic importance.

The Finance Act 2016 amended the Companies Act by deleting the requirement that all foreign companies in Kenya should have 30% shareholding by Kenyan citizens.

Status
Completed
Measurement
Implementation Committee to investigate idea and promote with potential investment banks who can facilitate this.
Working Group
Achievement

Policy Guidance Notes on Global Depositary Notes /Receipts issued in July 2017.

Status
Completed
Measurement
Investigate idea and promote with potential investment banks who can facilitate this.
Working Group
Achievement

Policy Guidance Notes on Global Depositary Notes/Receipts issued in July 2017.
The framework caters for both inward and outbound GDR/N.

Status
Completed
Measurement
NSE to undertake campaign to make the ease of listing and benefits of listing on GEMS well known to advisors, intermediaries and companies suitable for listing.
Working Group
Achievement

5 GEMS listed at the Exchange to date against a target of 12 listings.
Initiatives to promote listing ongoing e.g. the business incubator and accelerator experience.
A study was undertaken with the partnership of CMA, NSE and FSD Kenya on the strengthening of the GEMS market in September 2015 and the recommendations are progressively being implemented.

Status
Time bad

Key

No Progress
Behind Schedule
Ahead of Schedule