Money Markets
NSE chief executive officer Peter Mwangi. PHOTO | SALATON NJAU
By CHARLES MWANIKI
In Summary
- Previously, the fee for a trading licence varied.
- Stockbrokers who previously fully controlled the exchange were seen as determined to keep competitors out of the market by setting a high entry fee.
- Attracting more players onto the trading floor could turn licensing into a consistent income stream for the exchange
Investment banks and stockbrokers seeking trading
licences at the Nairobi Securities Exchange will now pay Sh25 million,
easing market entry for traders whose predecessors paid up to Sh250
million for the right.
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NSE chief executive Peter Mwangi told the Business Daily
that with demutualisation which separates ownership and trading rights,
the bourse had set a standard market access fee for both equity and
bond trading.
“Once they are licensed by CMA (Capital Markets
Authority) and apply to us for the trading licence we will admit them.
They will pay us a market access fee of Sh25 million for a stockbroker
or investment bank trading licence. For an authorised securities dealer,
a category that only trades bonds, the fee is Sh1 million,” he said.
Previously, the fee for a trading licence varied,
with Mr Mwangi saying that CBA Capital – a subsidiary of Commercial Bank
of Africa – paid Sh40 million for the right to trade securities at the
exchange in August 2013.
In 2008, Renaissance Capital paid Sh250 million for a seat at the stock exchange through an auction.
A seat meant that they bought both a stake in the exchange and a right to access the trading floor.
Equity Investment Bank, a subsidiary of Equity Bank,
is reported to have acquired collapsed broker Francis Thuo and Partners
Ltd for Sh150 million, which came with a full takeover of the firm’s
shareholding and liabilities.
NSE is at present selling shares to the public,
opening ownership beyond a few players. The high and varying costs
previously attached to buying a seat was seen as a deterrent to
attracting additional players and thus limiting the growth of capital
markets.
Keep competitors out
Some licensed investment banks such as Barclays
Financial Services, EIB and CBA Capital spent years trading through
intermediaries due to the costly licences.
Stockbrokers who previously fully controlled the
exchange were seen as determined to keep competitors out of the market
by setting a high entry fee.
They, in turn, argued that lowering the fees would
amount to short-changing those among them who had paid a much higher
price to join. Three investment banks currently do not hold trading
licences. They are KCB Capital, Barclays Financial Services and
Ecobank’s EBI Investment Corporation Kenya Ltd.
KCB Capital earlier indicated it was eyeing a
trading licence with an application likely by the end of this year, but
it cited uncertainty over fees as a potential handicap.
“We are waiting for them to apply formally. To get
the licences as investment banks from the Capital Markets Authority,
they received a letter of no objection from the exchange,” said Mr
Mwangi.
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