Nairobi Securities Exchange (NSE) Plc has reduced transaction fees by five percent for equity investors who adopt the same-day trading model.
The bourse is gearing up for the implementation of a Day-Trading model in equity transactions in the latest attempts to woo investors and new companies to list.
The stockmarket is weighed down by investor apathy, lack of new listings and unscrupulous dealers preying on unsuspecting investors through insider trading.
The latest move is designed to bolster liquidity in the market, with the buying and selling or selling and buying of shares of the same security on the same account being effected on the same day, also referred as intraday trading. However, the cash settlement for the traded shares will still be carried out on the current T+3 cycle where payment is effected three days after the transaction.
According to the guidelines approved by the Capital Markets Authority (CMA) on October 21 rebates, calculated as a percentage of the transaction levies , will be offered to investors on trade offsetting positions created on the same day.
According to the rules, NSE levy of 0.12 percent will reduce to 0.114 percent of the value of the transaction after applicable rebate of five percent while CMA and Central Depository and Settlement Corporation levies of 0.12 percent and 0.08 percent respectively will remain unchanged. The guidelines stipulate that only trades executed on the same day for the same security on the same Central Depository System account with a single broker will qualify for selection as day trades.
Efforts to get comments from NSE chief executive Geoffrey Odundo proved futile as he didn’t not respond to our emailed questions by the time of going to the press.
The stockmarket which harbours 66 listed companies some of which have been suspended and delisted, is fighting to recapture the allure that vanished in the thin air after the Safaricom initial public offering (IPO) fiasco in 2008 that pulled over 742,000 new investors in the market
Many took bank loans and sold personal properties to buy into the 10 billion share offer that later backfired after the share price fell below the IPO price of Ksh 5 ($0.04) per share, causing many investors particularly the small and retail investors to flee the market.
NSE 20 Share Index, a key market performance indicator has declined by more than twofold to as low as 1,866.97 on November 24 from a high of 5,444.83 in 2007.
Investor accounts have stagnated at around 1.5 million of which 1.13 million accounts were active last year, following increased awareness campaigns urging stockmarket investors to activate dormant accounts.
An attempt by the NSE and CMA to jumpstart the market recovery through new products such as real estate investment trusts, exchange traded funds, derivatives , securitisation, global depositary notes and receipts, securities lending and borrowing have not been successful in bring new investors in the market.
According to the CMA, the worrying situation on the stockmarket has been compounded by competing investment opportunities that are short-term in nature including mobile money products sports gambling and government securities.
On the other hand potential issuers have been kept off the market due to high listing costs and listing disclosures, tough macroeconomic environment leading to declining share prices on the exchange and the proliferation of private equity firms that are providing virtually free and easily accessible capital to SMEs, with the added benefit of enhancing professional management and governance of such firms
Risk exposure of potential issuers to post-offer/listing price correction and in some instances complete price collapse in spite of professional valuation has also been singled as a barrier to new companies coming to the market.
According to CMA market, concentration also remains a key risk with the top five companies accounting for more than 80 percent of the total market turnover at the bourse, with mobile phone operator Safaricom in some instances accounting for 60 percent of the market share.