The Star (Nairobi)

Kenya: Regulator Accuses NSE of Blocking Market Reforms

stTHE Capital Markets Authority has opened a new war front with the 59-year old Nairobi Securities Exchange accusing it of being anti-reforms and threatening to push for a second exchange.

The regulator hit out at the NSE saying it has bee resistant to open up the market to competition.

Board chairman Kung'u Gatabaki said yesterday the regulator will reconsider revisiting the debate on separate exchanges as the markets seeks to usher in new products including real estate investment trusts, futures and derivatives markets.

"This idea of people saying the market is small does not hold water," he said citing the banking industry that has 43 banks and nine deposit taking microfinance. "We have received some applications... and we really need to rethink what's good for the market. "

He warned efforts to establish a world class Nairobi International Financial Centre would not be successful unless all players adhered to tight global standards.

"I wish to appeal to the government to ensure that, as we position ourselves as a globally competitive capital market, we must subject our capital markets institutions, be they the Nairobi Securities exchange, the Central Depository and Settlement Corporation to similar regulatory standards as our international competitors," he said. "There is no other way of attracting international investors and issuers than through full adoption of global standards for trading, clearing, settlement and registration Systems."

He spoke during the validation workshop for the CMA's 10 year master plan in Nairobi. Lead consultant Hugh Simpson of UK's Bourse Consult said the plan seeks to align the domestic market to international best practices.

"The most urgent thing for the Kenyan market is to move to the global standards because if you want to attract international investors you have to operate in a way that they feel comfortable," Simpson said in an interview. "Moving from a local financial centre to an international one requires you modernising the infrastructural requires you modernise the infrastructure systems before you start thinking of linkages with other international systems."

The CMA and NSE have in recent months clashed publicly over licensing of market intermediaries through the the Capital Markets (Amendment) Bill 2013,a role long held by the latter.

The authority had said retaining such powers to the NSE would undermine its authority as a regulator, arguing that the latter be treated as a player in the market.

They have also failed to agree on the long standing demutualisation of the bourse-change to a company limited by shares from one limited by guarantees.

The NSE has ceded only 12 per cent stake to the state to be split equally between Treasury and CMA's Investor Compensation Fund, contrary to an earlier gazette notice seeking a 20 per cent stake.

The NSE board has maintained that each of its 22 member stock brokers and investment banks should control a four per cent shareholding each.

"Demutualisation is an ongoing discussion, we have not completed yet but we are getting there," Gatabaki said yesterday.

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