5.1: Enhance depository and settlement infrastructure
CDSC has included this activity for implementation in their 2016-2020 strategy.The board and management of the CDSC reviewed this recommendation at length and have determined that the Corporation’s shareholding is indeed representative of the key users of its facilities. This is highlighted in the Capital Markets Challenge Fund, a conglomerate of 9 issuers, Banks Investment Banks and insurance Companies, the Nairobi Securities Exchange (a public company), the AKS nominees – a special purpose vehicle of the members of KASIB and the Investor Compensation Fund.
CDSC has included this activity for implementation in their 2016-2020 strategy.The CDSC Board is composed of members elected by the various shareholders of CDSC, who are a diverse representation of various participants and users. There are also 2 public interest directors who are elected by the Board through the nomination committee.
This has been reprioritized to a longterm activity.
The system was upgraded and went live on 14 October, 2019 and has the capability to support the following functions;
Cash settlement leg for equities implemented through CBK RTGS system in 2015. CDSC system modernization under implementation.
As part of improving risk management cash settlement leg for equities implemented through CBK RTGS system in 2015.Enterprise Risk Management Framework is in place and review is done regularly.Mitigation measures to be automated through the new systems.
CDSC has introduced a Risk function as well as a Compliance function within its organisational structure supported with an up to date Enterprise Risk Management Framework and Business Continuity Plan. Key programs for monitoring risk in place are:
This is included in their 2016 - 2020 strategy.
The assessment was completed in 2016 and the recommendations are being implemented as per the work plan.CDSC has engaged a consultant to assess the level of compliance with the CPMI-IOSCO principles. The report is expected in January 2020.The assessment was independently assessed. And the level of compliance was assessed at Broadly Observed. CDSC is keen to seal all the gaps that have been identified during the assessment and is in the process of putting in place a work plan of implementation of the recommendations from the assessment.
A consultant was on-boarded by the National Treasury in July 2017 to undertake a feasibility study on the viability of merging the 2 CSDs.
The study was completed in June 2018 on Kenya Post-trade infrastructure. The study recommended that CBK and CDSC should operate separate CSDs for government and corporate securities respectively since both are at different stages of upgrading their systems. However, this structure should be reviewed before the start of the next investment cycle, when it becomes necessary to invest in replacement systems.
The SLB and short selling Regulations were gazetted on 12 January 2018.The Authority is in engagement with CDSC to develop the stock lending operational procedures.
The new system under modernization has the capability of supporting the issuance of GDRs.
CDSC Kenya and CSCS of Nigeria are working in conjunction with the African Development Bank on an initiative to link the two markets to support trading and settlement of securities listed in the two countries. The proposed framework was submitted to the Authority on 6 April 2017.On 4 February 2019, the Authority approved the application by CDSC on the proposed inter depositary services between Kenya and Nigeria facilitated by Africlear Global.
The Authority developed a concept paper on the establishment of CCPs and is in the process of developing policy paper to guide requirements for the establishment of a CCP by June 2019.
In April 2017, CDSC made proposals to the Authority on connectivity with Nigeria Securities Exchange through Africlear. On 4 February 2019, the Authority approved the application by CDSC.The new Central Depository System (CDS) that went live on 14 October 2019 has the capability of interdepository Linkages.