KIGALI Nov 30 Kenya's Nairobi Securities
Exchange expects its first exchange traded fund (ETF)
to be approved by the regulator this year and trading to start
The exchange's chief executive Geoffrey Odundo told Reuters
it had been investing in new infrastructure to allow the trading
of new products, like the ETF, as it diversifies from equities
and bond trading.
Earlier this month, NSE issued a profit warning for the year
after a fall in share trading.
"Almost 95 percent of all product development is complete.
We are at a very imminent phase of launching very many products.
We are looking at ETFs coming into play," he said at a meeting
of African bourse chiefs in the Rwandan capital on Tuesday.
A foreign company, which he did not identify, had applied to
the capital markets regulator for permission to offer a
commodities-based ETF for trading on the NSE.
"It will be a first for the NSE," he said.
ETFs are securities traded on exchanges that can allow
investors to hedge their risk, as they are based on underlying
assets like commodities or a basket of stocks.
The NSE has also been laying the groundwork for a
derivatives market that Odundo said will start operating soon.
Like other exchanges in Sub-Saharan Africa, the NSE
struggles with poor liquidity and the Capital Markets Authority
(CMA) regulator has published proposed guidelines to allow funds
to trade on borrowed securities in the market to address this.
"Investors will now be able to lend securities to another
party, who can then trade on them depending on their view of the
market and then be able to give them back," Odundo said.
Local pension funds usually hold shares in top firms listed
on the bourse, leaving other market participants starved of a
supply of the shares, thus stifling liquidity.
The new guidelines on stock lending and borrowing will
eliminate that problem.
"There is urgency and I suspect in the first quarter of next
year we should have those regulations up," he said.
(Editing by Katharine Houreld and Alexander Smith)