NSE ushers in new trading order for fixed income investments

The Nairobi Securities Exchange (NSE) has amended its Fixed Income Securities (FIS) Trading Rules. This follows a formal approval from market regulator, the Capital Markets Authority (CMA).

The FIS Trading Rules cover how NSE market intermediaries access the Automated Trading System (ATS) of the exchange. They also detail the obligations of NSE market intermediaries including their order management of trades in FIS executed on the same platform.

Chief Executive Officer Geoffrey Odundo said the amendment of the FIS Trading Rules is part of the bourse's strategy to broaden and deepen the bond market.

He described the move as a significant step towards ensuring that issuers, institutional and individual investors gain access to a more diverse secondary market.

"With this development, we look forward to listing a more diverse variety of debt securities including Senior Unsecured Fixed Rate Notes and Equity Linked Notes on our Fixed Income Market Segment," Mr Odundo said in a statement.

The amendments are in Section 5.2.2 (ii) and 5.2.3 of the Trading Rules and include the creation of a Restricted Board where restricted FIS offers shall trade and the trading restrictions on the Restricted Board.

Public offers

The Restricted Board will be used to trade Fixed Income Securities arising from public offers targeting sophisticated investors.

The investors include high net worth individuals, authorised schemes, collective investment schemes, banks and their subsidiaries, co-operative societies and pension or retirement funds as stipulated in the Capital Markets Act. Trading on the Restricted Board shall be limited to sophisticated investors only.

Mr Odundo explained that the amendment of the FIS Trading Rules is a clear indication of the vital role the segment plays in raising long term capital for both the Government and Corporates.

The Government has raised Sh87.3 billion through the issuance and listing of Treasury Bonds since the beginning of this year. Similarly, the bourse has listed a total of Sh21.9 billion in Corporate Bonds all of which have been oversubscribed.

Treasury Bonds are medium to long term debt instruments, usually longer than one year issued by the government to raise money in local currency. Maturities of Treasury Bonds that have been issued so far range from one to 30 years.

The types of Treasury bond may be defined by the purpose, interest rate structure, maturity structure, and even by issuer.