CMA mulls NSE window to loan out shares

Investors at the Nairobi Securities Exchange will soon be able to borrow and lend their shares to other investors in a new trading practice set to be introduced by the Capital Markets Authority (CMA).

Through securities lending and borrowing, investors will be able to transfer their shares to buyers with a formal agreement on when the shares will be returned at a pre determined price.

“Securities lending and borrowing is the temporary transfer of securities from one party to another with a simultaneous formal agreement to return the securities at a pre agreed price either on demand or at an agreed time in future,” CMA Chief Executive Officer Paul Muthaura said in a notice in the dailies.

The CMA has called for a stakeholder meeting with market participants to discuss the planned changes.
Also on the cards is the introduction of short selling.

Short selling allows an investor to borrow another investors shares, sell them if they think the price will drop, buy them back at the lower price and return the shares to the lender, keeping the margin made from the trade.

The trading mechanisms were first mooted by the Central Depository and Settlement Corporation (CDSC) back in 2013 to boost its earnings from trades.

The CMA said this is expected to boot vibrancy at the securities market while improving the level of income for investors.
The move comes a time the NSE has registered sluggish growth linked to slowing economic growth and pre election jitters.