System breakdown disrupts M-Akiba

From left: Capital Markets Authority director, regulatory policy strategy, Luke Ombara, NSE chief executive officer Geoffrey Odundo, National Treasury director general Wahoro Ndoho, CDSC chief executive Rose Mambo and CBA group executive director Martin Mugambi during the listing ceremony of the M-Akiba Bond on the bourse in Nairobi on April 11, 2017. PHOTO | SALATON NJAU 

The Nairobi Securities Exchange (NSE)

By BRIAN NGUGI

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By MUGAMBI MUTEGI

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Summary

• Trading of the M-Akiba bond in the secondary market stopped just 24 hours after it was launched.
• Action was taken after reconciliation delays, seen to make it possible for investors who had placed sale orders to receive payment while still retaining ownership of the papers were discovered.
• The bourse’s Twitter handle, as well as that of M-Abika, simply stated that “we have temporarily halted secondary trading of the M-Akiba bond in order to deal with some urgent technical issues.”

yesterday suspended trading of the Sh150 million mobile phone-based bond to prevent fraud following a system breakdown.

READ: M-Akiba bond starts trading at the Nairobi bourse

The trading of the bond in the secondary market stopped just 24 hours after it was launched. Market insiders said the action was taken after reconciliation delays, seen to make it possible for investors who had placed sale orders to receive payment while still retaining ownership of the papers were discovered.

“Secondary trading of M-Akiba has been temporarily stopped due to a communications hitch between trading and depository systems, which caused delay in settlement of trades,” a senior Treasury official said, adding that engineers were working around the clock to resolve the issue.

The Treasury raised Sh150 million through the mobile phone-based three-year M-Akiba bond days before the offer closed on April 5.

This pilot digital bond sale was meant to test the waters and whet the appetite of investors ahead of the Sh4.85 billion offer which President Uhuru Kenyatta is expected to launch in June.

The digital bond trading system sits at the NSE but is fundamentally distinct from the one used to trade normal stocks.

Investors are able to place sale or purchase orders through their phones using an Unstructured Supplementary Service Data (USSD) code that works on the Safaricom or Airtel mobile networks.

CBA Group early this week won the contract to serve as a counterparty during trading of the bond, and is paying investors who decide to sell their bond holdings through their mobile phones.

READ: CBA beats KCB to mobile phone bond trading deal

The system breakdown just a day after the bond began trading in the market came as a big setback for the government, which has been promoting the digital paper as a world first and yet another avenue for promoting financial inclusion.

The NSE

did not respond to queries on M-Akiba trading.

The bourse’s Twitter handle, as well as that of M-Abika, simply stated that “we have temporarily halted secondary trading of the M-Akiba bond in order to deal with some urgent technical issues.”

A customer care representative at M-Akiba said the plug had been pulled on the system Wednesday morning to enable the “IT team to upgrade of the system.”

“There was some information on the database we needed to add,” the official said.

Investors who did not get a piece of the mini-security in the primary market will now have to wait “at least 48 hours” for a chance to buy from the 5,692 investors who bought the government paper.

Official data after the bond sale showed that 102,632 people registered on the M-Akiba mobile phone bond platform but only 5.5 per cent actually invested in it.

Individual investors bought the bond in different chunks ranging from Sh3,000 to Sh1.13 million, the Treasury said, signalling that the sale was mainly dominated by big buyers and not the retailers it was meant to serve.

The Treasury is banking on M-Akiba to expand its revenue sources from the traditional pool of banks and high net-worth individuals as it prepares to fill its Sh500 billion budget deficit and retire old debts in the next financial year.

READ: All you need to know about M-Akiba bond