Investors to receive Treasury bond proceeds on same day

Kenya: The Nairobi Securities Exchange (NSE) has put in place mechanisms that will see investors who sell their treasury bonds receive their pay on the same day.

Initially, the settlement cycle for Fixed Income Securities or bonds as per the NSE Trading Rules was T+3, meaning investors could get their cash three days after the completion of the sell-purchase transaction.

NSE Chief Executive Officer Peter Mwangi said the bourse has put in place a secure interface, which is now able to relay the traded position executed via the Automated Trading System (ATS) to the settlement agent — Central Bank — in three intervals within the daily trading sessions. The three intervals, he said, are relayed at 11.00 am., 1.00 pm and market closure at 3.00 pm. “This development has enabled our market to achieve a settlement cycle which ranges from T+3 to T+0,” said Mwangi. T+0, commonly referred to as day trading, means  an investor can purchase a treasury bond in the morning and trade the same bond within the same trading day.

“This innovation is in line with our strategy to enhance the liquidity of the Fixed Income Securities Market Segment and guarantee faster settlement in the trading of bonds,” he said.

Mr Mwangi said the Exchange would continue to put in place measures geared towards ensuring the market remains competitive, fair and transparent. He said the bond market remains a reliable platform for the Government to raise funds through Treasury Bills, Treasury Bonds and Infrastructure Bonds.

“This year alone, the Government has raised Sh64.07 billion through Treasury Bonds,” he said. The latest move is part of efforts by the NSE to deepen and boost liquidity in the bond market, which has been tipped to be a key driver of the government’s long-term development blueprint, Vision 2030.

Treasury bond settlement takes place in the Kenya Electronic Payment and Settlement System (KEPSS) that is domiciled at the Central Bank. NSE marked the first day of automated trading in government bonds through the Automated Trading System (ATS) in November 2009.