4.2: Develop commodities and derivative markets
The Capital Markets (Derivatives Markets) Regulations 2016 are in place to govern the derivatives market. The NSE successfully concluded the derivatives market pilot test phase in December 2018 which covered two cycles:
i) Systems test using dummy data
ii) Live testing using actual cash.
Issues identified during the pilot test phase were successfully closed out and critical updates to IT infrastructure & Systems made. CMA granted approval to NSE to launch and operate the Derivatives Exchange Market on 29 May 2019.
The Capital Markets (Derivatives Markets) Regulations 2015 as prescribed in the Capital Markets Act provides for the licensing of derivatives exchange and approval of clearance & settlement rules by the CMA.CMA licensed NSE to operate as a futures exchange on 19 October 2015.CMA granted approval to NSE to launch and operate the Derivatives Exchange Market on May 2019 and launched in July 2019.
NSE licensed to operate as a futures exchange on 19 October 2015.CMA granted approval to NSE to launch and operate the Derivatives Exchange Market on 29 May 2019 and launched in July 2019.
CMA engaged a resident consultant to provide an opinion on the suitability of the current tax framework in relation to derivative transactions. The consultant in his opinion noted that there are no immediate tax issues given that the Capital Gains Tax was suspended.
The Authority in conjunction with NSE has undertaken various awareness building programmes with market players.A draft CMA derivatives market capacity building program was developed, reviewed and rolled out in January 2018. The CMA derivatives market capacity building program began implementation in January 2018, targeting fund managers, policy makers, market intermediaries and staff. The following workshops have so far been held:i. CMA Directorate of Market Operations Derivatives Training- 28 November 2018ii. Joint CMA and NSE Board training- 29 November 2018 iii. Market participants Forum-29 November 2018iv. Trustee awareness program- 30 November 2018
The Authority is a member of the National taskforce for the establishment of a commodities exchange in Kenya.The Authority is a member of the Coffee Sub-Sector Reforms Implementation Committee that aims to transform Nairobi Coffee Exchange into a fully-fledged coffee exchange regulated by the Capital Markets Authority.Feasibility study on the viability of a commodities exchange in Kenya was undertaken and consultants report published (stalwart report). This report provides the guiding principles to the National Taskforce. Project Management Office established under State Department for Trade. The Kenya National Multi Commodity Exchange (KOMEX) was incorporated on 29 March 2019, subsequently an expression of interest process was completed and investors to capitalize KOMEX have formed the Board to oversee the establishment of KOMEX. Draft Capital Markets (Commodity markets) Regulations, 2019 and the Warehouse Receipt Systems Regulations, 2019 under Crops Act have been developed and stakeholder engagement on the same is under progress.
The Coffee Sub-Sector Reforms Taskforce report was published in 2016. This taskforce report provides the guiding principles to the CSIC. The Capital Markets (Coffee Exchange) Regulations, 2019 and the Coffee General Regulations, 2019 under Crops Act were developed and stakeholder engagement completed. On 1st of July 2019, the CS Agriculture gazetted the Coffee General Regulations, 2019. The CSIC and CMA are following up the National Treasury to gazette the Capital Markets (Coffee Exchange) Regulations, 2019.
The Authority submitted proposed amendments to the WRS Bill in 2018. The Bill was passed by the Senate in February 2018 and subsequently passed by the National Assembly in November 2018 but after further amendments. However, in passing the amendments to the Bill, the jointly proposed amendments submitted by the Ministry of Agriculture and Trade and the Authority were not incorporated.An appeal to the Clerk of the National Assembly for consideration of the jointly proposed amendments has been done.The WRS Bill was enacted on 18 June 2019 without incorporating the jointly proposed amendments.
CMA was appointed as a primary regulator for spot commodities markets by Finance Act 2016.
CMA was appointed primary regulator of spot commodities by the Finance Act 2016. Commodities like Coffee and Tea have been of interest to the Capital Markets Masterplan implementation team.
There are two Government-led initiatives on Commodity Markets reform.
The KOMEX was incorporated on 29 March 2019 subsequently an expression of interest process was completed and investors to capitalize KOMEX have formed the Board to oversee its establishment.Draft Capital Markets (Commodity markets) Regulations, 2019 and the Warehouse Receipt Systems Regulations, 2019 under Crops Act have been developed. The WRS Act 2019 was gazetted on 28 June 2019.Two national level consultative meetings to discuss the the Draft Capital Markets (Commodities Markets) Regulation 2019 were held in August & September 2019. More consultative meetings are planned for Q2 2019.The Joint Taskforce on establishment of a Commodities Exchange in Kenya has reviewed all the comments and questions raised from all stakeholder engagements and the public exposure. Th regulations have thus been reviewed/ refined and redrafted to incorporate comments before onward submission to the National Treasury requesting for gazettement.
This is to be progressed once the commodities exchange has been established.
CMA was appointed as a primary regulator for spot commodities markets (including energy) by Finance Act 2016.