KENYA: Settlement of Securities Moves to Central Bank of Kenya

Friday January 16 2015

The Capital Market Authority of Kenya has announced that the cash side of the settlement process for transactions concluded on the Nairobi Securities Exchange (NSE) is now being done through the Central Bank of Kenya’s (CBK) Real Time Gross Settlement (RTGS) system, with effect from 15th January 2015. Previously, the cash settlement for securities transactions was effected through four commercial banks appointed as settlement banks by the CDSC. The securities leg of the settlement process, which entails the transfer of securities between the buyers and sellers, will continue to be carried out at CDSC.

The CDSC stated that the milestone moves the capital market a step closer towards providing full delivery versus payment (DVP) while deepening the capital markets.

The use of the RTGS system for securities settlement is a substantial step in strengthening the measures to address settlement risk, in line with the overall mitigation arrangements to combat systemic risk.

The movement of the settlement of securities to the Central Bank of Kenya constitutes the first phase of the Kenyan markets full transition to settlement of securities transactions in Central Bank money in line with global best practice standards. This arrangement is expected to boost foreign and domestic investor confidence in the Kenyan market and promote greater liquidity at the Nairobi Securities Exchange (NSE).

The settlement cycle remains unchanged at T+3.

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