CMA, bourse clash over licensing of players

Mr Bob Karina (right), the NSE vice chairman and the Shanghai Stock Exchange Chairman Gui Minjie sign documents at a past function. Last month, Mr Karina said admission priority would be given to applicants holding CMA licences. FILE 

By CHARLES MWANIKI,

In Summary

• The Capital Markets Authority says admitting many will raise level of competition in the market.

The capital markets regulator and the stock exchange have clashed in a high stakes struggle to control licensing of intermediaries, a function that has been monopolised for years by the bourse.

Proposed amendments to the capital markets laws could see the Nairobi Securities Exchange (NSE) compelled to admit all trading applicants satisfying conditions set by the Capital Markets Authority.

However, the NSE in its proposals on the Capital Markets (Amendment) Bill 2013 wants the proposed amendment to Section 29, clause 21(b) deleted to retain its control of potential players.

On June 25, the NSE told the parliamentary Committee on Finance, Trade and Planning that the proposed amendments sought to compel and force it to admit everyone into trading.

“The NSE should be allowed to scrutinise and vet all applicants to be considered as trading participants,” said the bourse in a memorandum to the MPs.

(READ: Regulator opposes NSE’s clamour for more powers)

But CMA has responded, saying admitting stockbrokers, dealers or futures traders meeting its conditions and those of exchanges should be licensed.

The regulator is urging the parliamentary committee to consider NSE as a licensed player in the industry, saying competition would improve service delivery and efficiency.

Met requirements

“The only new introduction in the amendment is to make it mandatory for a securities exchange to admit a stockbroker or any other market intermediary upon confirmation that they have met all the requirements for admission as stipulated by the securities exchange itself,” the CMA says.

“This would ensure that a securities exchange does not impose unknown arbitrary requirements with the intention of blocking an applicant from getting the licence to trade on its platform,” said the regulator in its replying memorandum filed last month.

CMA added that with Kenya’s aspirations of developing an international financial centre, it was critical that the market infrastructure and practices be aligned to international best practices.

“The International Organisation for Securities Commissions calls on securities exchanges to have objective and publicly disclose criteria for access by trading participants, which are transparent and permit open and fair access,” said the CMA.

The NSE last month admitted two new trading applicants to the exchange: CBA Capital Limited and Equity Investment Bank Limited. The NSE stated that it was keen to admit new trading participants through a clear and transparent process as it seeks to expand the Kenyan market.