CMA moots system to nab insider trading at bourse

Capital Markets Authority acting CEO Wyckliffe Shamia (R) and Nairobi Stock Exchange CEO Geoffrey Odundo during a past workshop [Antony Gitonga, Standard]

The Capital Markets Authority (CMA) plans to install a surveillance system for real-time tracking of Nairobi bourse activities to unmask insider dealings.

The regulator says the system will help it to monitor trading activities on the Nairobi Securities Exchange (NSE), unearth misconduct and promote market integrity and investor confidence.

Insider trading happens when an investor buys or sells securities such as stocks based on privileged knowledge of events, thus disadvantaging other traders.

“CMA is seeking to procure a state-of-the-art multi-asset class surveillance system from an experienced firm to enable the conduct of monitoring and analytics of trading activities, market participants and traders,” said CMA in a tender document.

The search for a surveillance system for trading activities of asset classes such as equities, bonds, derivatives and commodities comes on the back of rising cases of insider trading at the NSE.

CMA in 2019 fined three traders including Kunal Kamlesh Bid and Andre Desimone Sh30.93 million over insider trading of KenolKobil shares before it was bought by the French firm, Rubis Energie.

The system will “provide timely and effective alerts on potential market manipulation, both in real-time and for post-trade analysis.”

The regulator says data collected by the system and red flags raised will form the basis for an inquiry or enforcement action against a market participant.

CMA says investor participation on the NSE has increased. “These developments point to the need for constant monitoring and review of the various aspects of the market to ensure that it is orderly, fair and efficient,” says the CMA.