Nairobi Securities Exchange (NSE) Ltd is the principal bourse in Kenya, offering an automated platform for listing and trading of securities. The Nairobi Securities Exchange Ltd is the second exchange in Africa to Demutualize and list its shares after the Johannesburg Stock Exchange. Currently NSE provides a trading platform for Equities, Bonds, Quasi Equity products like REITS and it’s in the process of launching the trading of derivative Products.
Demutualisation
To further boost the market, the Treasury, the Capital Markets Authority (CMA) and NSE are working on a demutualisation (changing a mutual or cooperative association into a public company by converting the interests of members into shareholdings to be traded at the securities exchange) plan that will see NSE listed at the equity market and new investors invited to buy shares. Previously, stockbrokers owned the NSE.
The bourse has determined what percentage brokers will retain in a process driven by the Demutualisation Steering Committee and in 2011 the NSE annual general meeting agreed on the structure, which has, however, met legal opposition from some collapsed stockbrokerage firms.
Pressure for demutualisation has grown after some brokers went under, disrupting smooth trading in shares. The move is expected to boost confidence in the bourse.
The NSE is the largest stock exchange in East and Central Africa with more than 50 listed companies. It is a limited liability company that has operated a closed shop ownership structure since it opened in 1954.Holders of the 20 shareholding ‘seats’ own the bourse.
History of NSE
1920s – 1953: Dealing in shares commenced with trading taking place on a gentleman’s agreement with no physical trading floor. London Stock Exchange (LSE) officials accepted to recognize the setting up of the Nairobi Stock Exchange as an overseas stock exchange (1953).
1954 – 1962: The Nairobi Stock Exchange (NSE) was registered under the Societies Act (1954) as a voluntary association of stockbrokers and charged with the responsibility of developing the securities market and regulating trading activities. Business was transacted by telephone and prices determined through negotiation.
1963 – 1970: The Government adopted a new policy with the primary goal of transferring economic and social control to citizens. By 1968, the number of listed public sector securities was 66 of which 45% were for Government of Kenya, 23% Government of Tanzania and 11% Government of Uganda. During this period, the NSE operated as a regional market in East Africa where a number of the listed industrial shares and public sector securities included issues by the Governments of Tanzania and Uganda (the East African Community).
However, with the changing political regimes among East African Community members, various decisions taken affected the free movement of capital which ultimately led to the delisting of companies domiciled in Uganda and Tanzania from the Nairobi Stock Exchange.
1975: When the EAC finally collapsed in 1975, the Government of Uganda compulsorily nationalized companies which were either quoted or subsidiaries of listed companies.
1988: The first privatization through the NSE, through the successful sale of a 20% Government stake in Kenya Commercial Bank. The sale left the Government of Kenya and affiliated institutions retaining 80% ownership of the bank.
1990: The CMA was constituted in January 1990 through the Capital Markets Authority Act (Cap 495A) and inaugurated in March 1990. The main purpose of setting up the CMA was to have a body specifically charged with the responsibility of promoting and facilitating the development of an orderly and efficient capital market in Kenya.
1991: NSE was registered as a private company limited by shares. Share trading moved from being conducted over a cup of tea, to the floor based open outcry system, located at IPS Building, Kimathi Street, Nairobi.
1993: The CMA increased the initial paid up capital for stockbrokers from Kshs.100, 000 to Kshs.5.0 million while that for investment advisors was set at Kshs.1.0 million.
1994: With the 1994 CMA Act (Amendments), it became mandatory that a securities exchange approved by the CMA be a company limited by guarantee. The number of stockbrokers increased by a further seven.
1996–2005
In 1996, the largest share issue in the history of NSE, the privatisation of Kenya Airways, came to the market. Having sold a 26% stake to KLM, the Government of Kenya proceeded to offer 235,423,896 shares (51% of the fully paid and issued shares of Kshs. 5.00 each) to the public at Kshs. 11.25 per share. More than 110,000 shareholders acquired a stake in the airline and the Government of Kenya reduced its stake from 74% to 23%. The Kenya Airways Privatization team was awarded the World Bank Award for Excellence for 1996 for being a model success story in the divestiture of state-owned enterprises. In 1998 the government expands the scope for foreign investment by introducing incentives for capital markets growth including the setting up of tax‐free Venture Capital Funds, removal of Capital Gains Tax on insurance companies’ investments, allowance of beneficial ownership by foreigners in local stockbrokers and fund managers and the envisaged licensing of Dealing Firms to improve market liquidity.
With effect from January I, 1999, Kenya adopted the International Accounting Standards (IAS) as the local accounting standards.
In August 2000, NSE implements a new trading cycle, (T+5). The Central Depository System (CDS) Act and the amended CMA Act (which covers Collective Investment Schemes (CIS)) are passed by Parliament and receive presidential assent, paving the way for the full implementation of the CDS and for the introduction of collective investment schemes in the Kenyan market.
Following the signing of a partnership agreement with the Association of National Numbering Agencies (ANNA) in September 2000, the NSE was appointed as the National Numbering Agency (NNA) for Kenya. The NNA is responsible for issuing the ISIN for financial securities issued under Kenyan jurisdiction in accordance with the ISO 6166 guidelines issued by ANNA.
In October 2000 NSE becomes a member of the Association of National Numbering Agencies (ANNA), the global securities numbering agency.
In April 2002 CMA announced the approval of the new NSE trading and settlement rules. The amount for block trades was revised upwards from Kshs. 3.0 million to between Kshs. 50.0 – 200.0 million. The block trade rules now apply to trade values of above Kshs. 50.0 million but less than Kshs. 200.0 million. Lastly, the brokerage commissions’ regime was liberalised.
July 2002 saw the foreign investor regulations amended, providing for a 25% minimum reserve of the issued share capital for Kenyan citizens, while the balance of the 75% becomes a free float for all classes of investors. Within this 75% share holding available to all classes of investors, there is no restriction on the amount to be held by a single foreign investor.
The signing of the shareholders’ agreement for the Central Depository and Settlement Corporation (CDSC) was done in August 2002. The shareholders consisted of the Nairobi Stock Exchange (20%), the Association of Kenya Stockbrokers (18%), the CMA Investor Compensation Fund (7%), and 9 institutional investors through the Capital Markets Challenge Fund (50%) who collectively invested in the Central Depository and Settlement Corporation (CDSC). The CDSC being the legal entity that owns and runs the clearing, settlement, depository and registry system for securities traded in Kenya’s capital markets.
As of November 2002, the NSE became the sole NNA in Kenya, responsible for allocating the unique code for quoted and unquoted securities domiciled in Kenya.
In March 2003 the CDSC in collaboration with the NSE commenced the CDS Education Campaign in preparation for the market automation. The first CDS Education Workshop, with the theme “The CDS Legal & Regulatory Framework” kicked off.
For the year ending 31 December 2003, the exchange recorded an equity turnover exceeding Kshs. 15.25 billion, more than the combined equity turnover recorded in the previous five years.
2004: Following the successful signing of an MOU between the Dar-es-Salaam Stock Exchange, the Uganda Securities Exchange and the Nairobi Securities Exchange, the East African Securities Exchanges Association was formed.
November 10, 2004: The central despository system was commissioned. For the first time in Kenya’s history, the process of clearing and settlement of shares traded in Kenya’s capital markets was automated.
For the year ending 31 December 2005, the exchange recorded an equity turnover exceeding Kshs. 36.52 billion (a 63.61% increase over the previous year’s performance of Kshs. 22.32 billion),
2006–2008
In May 2006, NSE formed a demutualisation committee to spearhead the process of demutualisation. A demutualisation consultant (Ernst and Young) was appointed to advice on the process.
In September 2006 live trading on the automated trading systems of the Nairobi Stock Exchange was implemented. The ATS was sourced from Millennium Information Technologies (MIT) of Colombo, Sri Lanka, who are also the suppliers of the Central Depository System (CDS). MIT have also supplied similar solutions to the Colombo Stock Exchange and the Stock Exchange of Mauritius. The NSE ATS solution was customised to uphold the spirit of the Open Outcry Trading Rules in an automated environment.
In the same breadth, trading hours increased from two (10:00 am – 12:00 pm) to three (10:00 am – 1:00 pm). Other innovations included the removal of the block trades board and introduction of the functionality for the trading of rights in the same manner as equities. Besides trading equities, the ATS is also fully capable of trading immobilised corporate bonds and treasury bonds.
An MoU between the Nairobi Stock Exchange and Uganda Securities Exchange was signed in November 2006 on mass cross listing. The MoU allowed listed companies in both exchanges to dualist. This will facilitate growth and development of the regional securities markets.
In February 2007 NSE upgraded its website to enhance easy and faster access of accurate, factual and timely trading information. The upgraded website is used to boost data vending business.
In July 2007 NSE reviewed the Index and announced the companies that would constitute the NSE Share Index. The review of the NSE 20‐share index was aimed at ensuring it is a true barometer of the market. A wide area network (WAN) platform was implemented in 2007; this eradicated the need for brokers to send their staff (dealers) to the trading floor to conduct business. Trading is now mainly conducted from the brokers’ offices through the WAN. However, brokers under certain circumstances can still conduct trading from the floor of the NSE.
February 1, 2008: The Nairobi Stock Exchange (NSE) announced the extension of trading hours at the bourse. Trading would commence from 9.00am and close at 3.00pm each working day.
February 25, 2008: In order to provide investors with a comprehensive measure of the performance of the stock market, the Nairobi Stock Exchange introduced the NSE All-Share Index (NASI).
April 2008: The NSE launched the first edition of the NSE Smart Youth Investment Challenge to promote stock market investments among Kenyan youth.
June 9 2008: The immobilized shares of Safaricom Ltd., commenced trading on the NSE after the trading session was opened in a colorful ceremony presided by H.E. President Mwai Kibaki. The Safaricom IPO increased the number of shares listed on the bourse to over 55.0 billion shares, from the previous 15.0 billion.
The Complaints Handling Unit (CHU) was launched in August 2009 to bridge the confidence gap with NSE retail investors. CHU provides a hassle-free and convenient way to have any concerns processed and resolved. Investors — local and in the diaspora — can forward their issues via e‐mail, telephone, fax, or SMS and have the ability to track progress on‐line.
In December 2009, NSE marked a milestone by uploading all government bonds on the ATS. Also in 2009, NSE launched the Complaints Handling Unit (CHU) SMS System to make it easier for investors and the general public to forward any queries or complaints to NSE
In July 2011, the Nairobi Stock Exchange Limited, changed its name to the Nairobi Securities Exchange Limited. The change of name reflected the strategic plan of the Nairobi Securities Exchange to evolve into a full service securities exchange which supports trading, clearing and settlement of equities, debt, derivatives and other associated instruments. In the same year, the equity settlement cycle moved from the previous T+4 settlement cycle to the T+3 settlement cycle. This allowed investors who sell their shares, to get their money three days after the sale of their shares. The buyers of these shares, will have their CDS accounts credited with the shares, in the same time.
In September 2011 the Nairobi Securities Exchange converted from a company limited by guarantee to a company limited by shares and adopted a new Memorandum and Articles of Association reflecting the change. In October 2011, the Broker Back Office commenced operations. The system has the capability to facilitate internet trading which improved the integrity of the Exchange trading systems and facilitates greater access to the securities market.
In November 2011 the FTSE NSE Kenya 15 and FTSE NSE Kenya 25 Indices were launched. The launch of the indices was the result of an extensive market consultation process with local asset owners and fund managers and reflects the growing interest in new domestic investment and diversification opportunities in the East African region.
As of March 2012, the Nairobi Securities Exchange became a member of the Financial Information Services Division (FISD) of the Software and Information Industry Association (SIIA).
In March 2012 the delayed index values of the FTSE NSE Kenya 15 Index and the FTSE NSE Kenya 25 Index were made available on the NSE website www.nse.co.ke. The new initiative gives investors the opportunity to access current information and provides a reliable indication of the Kenyan equity market’s performance during trading hours.
In May 2013, the Nairobi Securities Exchange moved to the Exchange, 55 Westlands Road, Westlands, Nairobi.
On June 27, 2014, The Capital Markets Authority proved the listing of the NSE stock through an IPO and subsequently self-list its shares on the Main Investment Market Segment. The IPO was set to open on July 24, 2014 and would run up to August 12, 2014. The listing will make the NSE join the of the Johannesburg Stock Exchange in being the only exchanges in Africa that are self-listed.
The NSE IPO was oversubscribed by 763.92%making it the most oversubscribed share offer in the NSE’s 60-year history. The NSE shares started trading on the Main Investment Market Segment of the exchange on September 9, 2014
In November 2014, the NSE welcomed two new listing to the bourse, i.e. Flame Tree Group,an FMCG company and Kurwitu Ventures,a Sharia complient investment company. Both were listed in the Growth Enterprise Market Segment by way of introduction. Effective 11 February 2015, CMC Holdings, Kenya’s largest importer of vehicles and largest car-assembly company, was de-listed from the NSE, following its take over by the Al-Futtaim Group, based in the United Arab Emirates.
In March 2015, the NSE officially joined the United Nations Sustainable Stock Exchanges (SSE) initiative whereby they made a voluntary pledge to inform their stakeholders of the importance of integrating sustainability in their capital markets.
Nairobi Securities Exchange – A comprehensive list of all Nairobi Stock Exchange Listed Companies their addresses (postal and physical), contacts (telephone and e-mail) and a link to the Kenya stock exchange company website.
Nairobi Securities Exchange Listed Companies
Nairobi Stock Exchange – Agriculture
- Rea Vipingo Ltd
- Sasini Tea and Coffee Ltd
- Kakuzi Ltd
Nairobi Stock Exchange – Commercial and Services
- Access Kenya
- Marshal’s EA
- Car and General
- Hutchings Biemer (suspended)
- Kenya Airways
- CMC Holdings
- Uchumi Supermarkets (suspended)
- Nation Media Group
- TPS (Serena)
- Scan Group
- Standard Group
- Safaricom
Nairobi Stock Exchange – Finance and Investment
- Barclays Bank of Kenya
- CFC Stanbic Bank
- Housing Finance
- Centum Investment
- Kenya Commercial Bank
- National Bank of Kenya
- Pan Africa Insurance Holding
- Diamond Trust Bank of Kenya
- Jubilee Insurance
- Standard Bank
- NIC Bank
- Equity Bank
- Olympia Capital
- Co-operative Bank of Kenya
- Kenya Re-Insurance
Nairobi Stock Exchange – Industrial and Allied
- Athi River Mining Ltd
- BOC Kenya
- British American Tobacco Kenya
- Carbacid Investments
- EA Cables
- EA Breweries
- Sameer Africa
- Kenya Oil
- Mumias Sugar Company
- Unga Group
- Bamburi Cement
- Crown Berger (K)
- EA Portland Cement
- Kenya Power & Lighting Company
- Total Kenya
- Eveready East Africa
- KenGen
Kenya Stock Exchange – Alternative Market Segment
- A Baumann & Company
- City Trust
- Eaagads
- Express
- Williamson Tea Kenya
- Kapchorua Tea
- Kenya Orchards
- Limuru Tea Company
Nairobi Securities Exchange – Nairobi Stock Exchange Listed Companies