The Nairobi Securities Exchange (NSE) was established in 1954 as the Nairobi Stock Exchange, based in
Nairobi
Nairobi ( ) is the capital and largest city of Kenya. The name is derived from the Maasai phrase ''Enkare Nairobi'', which translates to "place of cool waters", a reference to the Nairobi River which flows through the city. The city proper ha ...
the capital of
Kenya
)
, national_anthem = "Ee Mungu Nguvu Yetu"()
, image_map =
, map_caption =
, image_map2 =
, capital = Nairobi
, coordinates =
, largest_city = Nairobi
, ...
. It was a voluntary association of
stockbroker
A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks an ...
s in the European community registered under the Societies Act in
British Kenya
British may refer to:
Peoples, culture, and language
* British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies.
** Britishness, the British identity and common culture
* British English, ...
.
The exchange had 66 listed companies in February 2021.
History
Founding Nairobi Stock Exchange (1954-1999)
The Nairobi Stock Exchange was established in 1954 as the in
Nairobi
Nairobi ( ) is the capital and largest city of Kenya. The name is derived from the Maasai phrase ''Enkare Nairobi'', which translates to "place of cool waters", a reference to the Nairobi River which flows through the city. The city proper ha ...
, the capital of
Kenya
)
, national_anthem = "Ee Mungu Nguvu Yetu"()
, image_map =
, map_caption =
, image_map2 =
, capital = Nairobi
, coordinates =
, largest_city = Nairobi
, ...
. It was a voluntary association of
stockbroker
A stockbroker is a regulated broker, broker-dealer, or registered investment adviser (in the United States) who may provide financial advisory and investment management services and execute transactions such as the purchase or sale of stocks an ...
s in the European community registered under the Societies Act in
British Kenya
British may refer to:
Peoples, culture, and language
* British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies.
** Britishness, the British identity and common culture
* British English, ...
.
Previous to its founding, dealing in shares and stocks started in the 1920s when it was the British colonial
Kenya Colony
The Colony and Protectorate of Kenya, commonly known as British Kenya or British East Africa, was part of the British Empire in Africa. It was established when the former East Africa Protectorate was transformed into a British Crown colony in ...
(1920−1963), a part of the
British Empire
The British Empire was composed of the dominions, colonies, protectorates, mandates, and other territories ruled or administered by the United Kingdom and its predecessor states. It began with the overseas possessions and trading posts esta ...
. A stock exchange was first floated in 1922 at the Exchange Bar in the
Stanley Hotel in Nairobi. However, the market was not formal as there did not exist any rules and regulations to govern stock broking activities. Trading took place on a ‘gentleman's agreement.’ Standard commissions were charged with clients being obligated to honor their contractual commitments of making good delivery and settling relevant costs. At that time, stock broking was a sideline business conducted by accountants, auctioneers, estate agents and lawyers who met to exchange prices over a cup of coffee. Because these firms were engaged in other areas of specialization, the need for association did not arise. In 1951, an estate agent named of Francis Drummond established the first professional stock broking firm. He also approached the finance minister of Kenya, Sir Ernest Vasey, and impressed upon him the idea of setting up a stock exchange in East Africa. The two approached
London Stock Exchange
London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pau ...
officials in July 1953 and the London officials accepted to recognize the setting up of the Nairobi Stock Exchange as an overseas stock exchange. In 1954 the Nairobi Stock Exchange was then constituted as a voluntary association of stockbrokers registered under the Societies Act.
Since Africans and Asians were not permitted to trade in securities, until after the attainment of
independence in 1963, the business of dealing in shares was confined to the resident European community. At the dawn of independence, stock market activity slumped due to uncertainty about the future of independent Kenya. 1988 saw the first privatization through the NSE with the sale of a 20% government stake in
Kenya Commercial Bank
KCB Bank Kenya Limited is a financial services provider headquartered in Nairobi, Kenya. It is licensed as a commercial bank, by the Central Bank of Kenya, the national banking regulator. The bank has also been running Agency banking mode ...
. The sale left the
Government of Kenya
, image =
, caption = Coat of arms of Kenya
, date = 1963
, jurisdiction = Republic of Kenya
, url = http://www.mygov.go.ke/
, legislature = Parliament of Kenya
, meeting_place = ...
and affiliated institutions retaining 80% ownership of the bank. Notably, on 18 February 1994 the NSE 20-Share Index recorded an all-record high of 5030 points. The NSE was rated by the
International Finance Corporation
The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset-management services to encourage private-sector development in less developed countries. The IFC is a member of t ...
(IFC) as the best performing market in the world with a return of 179% in dollar terms. The NSE also moved to more spacious premises at the Nation Centre in July 1994, setting up a computerized delivery and settlement system (DASS). For the first time since the formation of the Nairobi Stock Exchange, the number of stockbrokers increased with the licensing of eight new brokers.
In 1996 saw the largest share issue in the history of NSE with the privatization of
Kenya Airways
Kenya Airways Ltd., more commonly known as Kenya Airways, is the flag carrier airline of Kenya. The company was founded in 1977, after the dissolution of East African Airways. Its head office is located in Embakasi, Nairobi, with its hub a ...
. Having sold a 26% stake to
KLM
KLM Royal Dutch Airlines, legally ''Koninklijke Luchtvaart Maatschappij N.V.'' (literal translation: Royal Aviation Company Plc.), is the flag carrier airline of the Netherlands. KLM is headquartered in Amstelveen, with its hub at nearby Amste ...
, the Government of Kenya proceeded to offer 235,423,896 shares (51% of the fully paid and issued shares of KSh.5/= each) to the public at KSh.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 expanded 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. On 1 January 1999, Kenya adopted the
International Accounting Standards
International Financial Reporting Standards, commonly called IFRS, are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...
(IAS) as the local accounting standard.
Expansion (2000–2005)
NSE implemented a new trading cycle, (T+5) in August 2000. The Central Depository System Act (CDS) and the amended CMA Act covering Collective Investment Schemes (CIS) were passed by
parliament
In modern politics, and history, a parliament is a legislative body of government. Generally, a modern parliament has three functions: Representation (politics), representing the Election#Suffrage, electorate, making laws, and overseeing ...
and affirmed by the president, paving the way for the full implementation of the CDS and for the introduction of collective investment schemes in the Kenyan market. Following a partnership agreement with the
Association of National Numbering Agencies
Association may refer to:
*Club (organization), an association of two or more people united by a common interest or goal
*Trade association, an organization founded and funded by businesses that operate in a specific industry
*Voluntary associatio ...
(ANNA), the global securities numbering agency, in September 2000 the NSE was appointed the
national numbering agency A national numbering agency (NNA) is the organisation in each country responsible for issuing International Securities Identification Numbers (ISIN) as described by the ISO 6166 standard and the Classification of Financial Instruments code as descri ...
(NNA) for Kenya, making it responsible for issuing the
ISIN
Isin (, modern Arabic: Ishan al-Bahriyat) is an archaeological site in Al-Qādisiyyah Governorate, Iraq. Excavations have shown that it was an important city-state in the past.
History of archaeological research
Ishan al-Bahriyat was visited b ...
for
financial securities
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
issued under Kenyan jurisdiction in accordance with ANNA's
ISO 6166
An International Securities Identification Number (ISIN) uniquely identifies a security. Its structure is defined in ISO 6166. The ISIN code is a 12-character alphanumeric code that serves for uniform identification of a security through normaliza ...
guidelines. In October 2000 NSE became a member of ANNA.
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 KSh.50 – 200 million/=. The block trade rules now applied to trade values above KSh.50 million/= but less than KSh.200 million/=. Lastly, the brokerage commissions’ regime was liberalized. 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 shagfddds’ 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 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. The NSE celebrated its Golden Jubilee in 2004, and also hosted the 8th ASEA conference. In this celebration, the first NSE magazine dubbed "The Exchange" and, The Central Depository & Settlement Corporation (CDSC), which manages Central Depository Systems, were both launched. For the year ending 31 December 2003, the exchange recorded an equity turnover exceeding KSh.15.25 billion/=, more than the combined equity turnover recorded in the previous five years. For the year ending 31 December 2004, the exchange recorded an equity turnover exceeding KSh.22.32 billion/=; an increase of 46.37% over the corresponding period for 2003. For the year ending 31 December 2005, the exchange recorded an equity turnover exceeding KSh.36.52 billion/= (a 63.61% increase over the previous year's performance of Kshs. 22.32 billion).
New technologies and indexes (2006–2010)
In May 2006, NSE formed a
demutualisation
Demutualization is the process by which a customer-owned mutual organization (''mutual'') or co-operative changes legal form to a joint stock company. It is sometimes called stocking or privatization. As part of the demutualization process, memb ...
committee to spearhead the process of demutualisation. A demutualisation consultant (
Ernst and Young
Ernst & Young Global Limited, trade name EY, is a multinational professional services partnership headquartered in London, England. EY is one of the largest professional services networks in the world. Along with Deloitte, KPMG and Pricewaterh ...
) was appointed to advise 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
illennium 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 customized 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 trades immobilized corporate bonds and treasury bonds.
An MoU between the Nairobi Stock Exchange and
Uganda Securities Exchange
The Uganda Securities Exchange (USE) is the principal stock exchange of Uganda. It was founded in June 1997. The USE is operated under the jurisdiction of Uganda's Capital Markets Authority, which in turn reports to the Bank of Uganda, Uganda's ...
was signed in November 2006 on mass cross listing. The MoU allowed listed companies in both exchanges to dualist, to facilitate growth and development of the regional securities markets. In February 2007 NSE upgraded its website, in part 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.
In 2008, the NSE All Share Index (NASI) was introduced as an alternative index. Its measure is an overall indicator of market performance. The Index incorporates all the traded shares of the day. Its attention is therefore on the overall market capitalization rather than the price movements of select counters. In April 2008, NSE launched the NSE Smart Youth Investment Challenge to promote stock market investments among Kenyan youth. The objective of the challenge was threefold:
* To occupy the minds of the youth positively and draw them away from the negative energy created by the current political, economic and social situation in the country;
* Encourage the culture of thrift and saving funds amongst the university students;
* Encourage the youth to invest their savings in the capital markets.
After the resignation of Chris Mwebesa, the NSE board appointed Peter Mwangi to be the new NSE chief executive in November 2008. The Complaints Handling Unit (CHU) was launched in August 2009 to bridge the confidence gap with NSE retail investors and have any concerns processed and resolved. Also in 2009, NSE launched the Complaints Handling Unit (CHU) SMS System. The Nairobi Stock Exchange marked the first day of automated trading in government bonds through the Automated Trading System (ATS) in November 2009. The automated trading in government bonds marked a significant step in the efforts by the NSE and CBK towards creating depth in the capital markets by providing the necessary liquidity. In December 2009, NSE marked a milestone by uploading all government bonds on the ATS.
Nairobi Securities Exchange (2011–2022)
In July 2011, the Nairobi Stock Exchange Limited, changed its name to the Nairobi Securities Exchange Limited. The change reflected the NSE's strategic plan to become a full service securities exchange supporting 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 later, while buyers have their CDS credited at 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 system commenced operations, which facilitates internet trading. In November 2011 the FTSE NSE Kenya 15 and FTSE NSE Kenya 25 Indices were launched, after NSE consulted local asset owners and fund managers, focusing on diverse domestic investment in East Africa. In March 2012 the delayed index values of both new indexes were made available on the NSE website www.nse.co.ke.
The NSE became a member of the Financial Information Services Division (FISD) of the
Software and Information Industry Association (SIIA) in March 2012. In May 2013, the NSE moved to the Exchange, 55 Westlands Road, Westlands, Nairobi. On 27 June 2014, The Capital Markets Authority proved the listing of the NSE stock through an
IPO
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...
and subsequently self-list its shares on the Main Investment Market Segment. With the IPO running from 24 July 2014 to 12 August 2014, the listing made the NSE and the
Johannesburg Stock Exchange
JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the largest stock exchange in Africa. It is located in Sandton, Johannesburg, South Africa, after it moved from downtown Johannesburg in 2000. In 2003 ...
the only self-listed exchanges in Africa. The NSE IPO was oversubscribed by 763.92%, making it the most oversubscribed share offer in the NSE’s history. The NSE shares started trading on the Main Investment Market Segment of the exchange on 9 September 2014.
The NSE added two new listings in November 2014, the Flame Tree Group,
an
FMCG
Fast-moving consumer goods (FMCG), also known as consumer packaged goods (CPG), are products that are sold quickly and at a relatively low cost. Examples include non-durable household goods such as packaged foods, beverages, toiletries, can ...
company and Kurwitu Ventures,
a
Sharia
Sharia (; ar, شريعة, sharīʿa ) is a body of religious law that forms a part of the Islamic tradition. It is derived from the religious precepts of Islam and is based on the sacred scriptures of Islam, particularly the Quran and the H ...
compliant 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
The Al-Futtaim Group ( ar, مجموعة الفطيم, Majmouat al-Futtaim) is a large conglomerate based in Dubai, United Arab Emirates.
History
The group was founded in the 1930s and expanded rapidly in the 1940s and 1950s becoming an integrated ...
, based in the
United Arab Emirates
The United Arab Emirates (UAE; ar, اَلْإِمَارَات الْعَرَبِيَة الْمُتَحِدَة ), or simply the Emirates ( ar, الِْإمَارَات ), is a country in Western Asia (The Middle East). It is located at th ...
. 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.
The bourse had 66 listed companies in February 2021.
[https://www.reuters.com/article/kenya-bourse-idUSL8N2KH2HV] The exchange's CEO, Geoffrey Odundo, told the press in April 2022 that NSE.NR was looking to purchase stakes in additional bourses in Africa. At the time, it was the fifth biggest bourse in Africa by market capitalization, and owned 5.9% in
Tanzania
Tanzania (; ), officially the United Republic of Tanzania ( sw, Jamhuri ya Muungano wa Tanzania), is a country in East Africa within the African Great Lakes region. It borders Uganda to the north; Kenya to the northeast; Comoro Islands and ...
's
Dar es Salaam Stock Exchange
The Dar es Salaam Stock Exchange (DSE) is a stock exchange located on Ohio Street, west of Kivukoni, south east of Dar es Salaam, the commercial capital and largest city in Tanzania. It was incorporated in September 1996 and trading started in A ...
.
[https://www.cnbcafrica.com/2022/nairobi-securities-exchange-eyes-acquisitions-among-other-african-bourses/] In December 2022, the NSE officially linked with seven other different capital markets in Africa, across 14 African companies. That month the NSE also introduced "fractional investing" in Kenyan stocks.
[https://www.businessdailyafrica.com/bd/markets/capital-markets/how-fractional-share-ownership-will-work--4043126] It was reported on December 6, 2022, that foreign investors trading at NSE had halved within one week. At the time, the largest four stocks at the NSE by market capitalization were
Safaricom
Safaricom PLC is a listed Kenyan mobile network operator headquartered at Safaricom House in Nairobi, Kenya. It is the largest telecommunications provider in Kenya, and one of the most profitable companies in the East and Central Africa region. Th ...
,
Equity Group,
KCB, and
EABL
East African Breweries Limited, commonly referred to as EABL, is a Kenyan-based holding company that manufactures branded beer, spirits, and non-alcoholic beverages.
Overview
The group's headquarters are located in Nairobi, Kenya, with subsi ...
.
[https://www.businessdailyafrica.com/bd/economy/foreign-investors-trading-at-nse-halves-in-one-week--4044398]
Types of indices
These include:
# NSE 20 Share Index- Mean of top 20 performing companies under a certain review year
# NSE 25 Share Index- designed to represent performance of kenyan companies listed in the NSE
# NSE All Share Index (NASI)
# FTSE NSE Indices
# Chuley
Regional integration
NSE is a member of the
African Securities Exchanges Association ThAfrican Securities Exchanges Association(ASEA) was incorporated in 1993 in Nairobi (Republic of Kenya). ASEA's aim is to provide a formal framework for the mutual co-operation of securities exchanges in the African region. Its functions include th ...
, East African Securities Exchanges Association and an affiliate member of
World Federation of Exchanges
The World Federation of Exchanges (WFE), formerly the ''Federation Internationale des Bourses de Valeurs'' (FIBV), or International Federation of Stock Exchanges, is the trade association of publicly regulated stock, futures, and options exchang ...
.
Market listings
Subsidiaries and investments
Other than stock and bond trading as the main business of the NSE, the exchange has the following investments:
* NSE Clear Limited - 100% Shareholding - Nairobi, Kenya - Provision of clearing house services for the
derivatives
The derivative of a function is the rate of change of the function's output relative to its input value.
Derivative may also refer to:
In mathematics and economics
* Brzozowski derivative in the theory of formal languages
* Formal derivative, an ...
/
futures exchange
A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or f ...
.
* Central Depository and Settlement Corporation Limited - 22.5% Shareholding - Nairobi, Kenya - Provision of clearing, settlement and depository services.
Governance and ownership
Nairobi Securities Exchange, as of 2015, was governed by an eleven-person Board of Directors with Kiprono Kittony serving as the Chairman of the group and Geoffrey Odundo as the CEO.
The shares of the Nairobi Securities Exchange are listed and traded on its own main board, under the symbol NSE. the shareholding in the bourse's stock were as depicted in the table below:
See also
*
Economy of Kenya
The Economy of Kenya is a market-based economy with a few state enterprises, it is also an emerging market and an averagely industrialised nation ahead of its East African peers. Kenya is a middle income nation and plans to be a newly industr ...
*
List of African stock exchanges
There are 29 exchanges in Africa, representing 38 nations' capital markets.
21 of the 29 stock exchanges in Africa are members of the African Securities Exchanges Association (ASEA). ASEA members are indicated below by an asterisk (*).
The Egyp ...
*
List of stock exchanges in the Commonwealth of Nations
This is a list of active stock exchanges in the Commonwealth of Nations (Full Members). The Commonwealth of Nations features member-states located on all major continents and represents almost one-third of the Earth's population. Some states ha ...
*
List of stock exchanges
This is a list of major stock exchanges. Those futures exchanges that also offer trading in securities besides trading in futures contracts are listed both here and in the list of futures exchanges.
There are sixteen stock exchanges in the world ...
References
External links
Website of Nairobi Securities ExchangeWebsite of Kenya Capital Markets AuthorityWebsite of Authorized Data Vendor of Nairobi Securities ExchangeTranscentury To List
{{Authority control
01
Stock exchanges in Kenya
Nairobi
Economy of Kenya
Financial services companies established in 1954
1954 establishments in Kenya
1954 establishments in the British Empire
20th century in Nairobi