The National Treasury has commissioned a study to inform the implementation of a long-standing plan to have shares, corporate and government bonds under one custody.
This will see the Central Bank lose its control of the government securities, a development that has scuttled Nairobi Securities Exchange's proposed takeover of the Central Depository and Settlement Corporation.
PS Kamau Thugge said the merger of the central depositories at the Central Bank for government bonds and that at the CDSC will promote a “sound and efficient financial systems”.
“We are determined to ensure our settlement systems are efficient and convenient to investors and issuers of securities,” Thugge said in Nairobi yesterday. This is an indication the Treasury has given into pressure from market intermediaries, which started in earnest in 2011.
“We are also exploring the possibility of implementing a horizontal settlement system architecture in line with international practice.”
Thugge spoke when he officiated over the rebranding of the CDSC, a limited company formed in 1999 to provide centralised automated system for the transfer and registration of corporate bonds and shares.
CDSC chief executive Rose Mambo said the Kenya's capital market was “too small to have two depositories”.
A single depository system, she said, would contain costs of introducing new securities, including commodities exchange and derivatives.
“The plans that are underway are a review of what is at CDSC, what's at the CBK and how can we unify them and bring them together so that we have one depository supporting the entire market,” Mambo said. “There is no reason to have two separate infrastructure for markets our size.”
The CDSC has acquired a new system at a cost of between $100,000 (Sh10.17 million) and $120,000 (Sh12.2 million) from South Africa to facilitate settlement of trade in shares within a day from April. Such transactions presently take three days at the Nairobi Securities Exchange.
“We expect to receive delivery of a version that we will go live with in November this year,” she said. “We will then proceed with testing, with integration with our stockbrokers, our central depository agencies, the NSE and by April next year, we should be ready to go live.”
The system will have capacity to be linked to global depositories, including Belgium-based Euroclear and Luxembourg's Clearstream.
“If we have partnerships with them, then we have information sharing, we have products that can be traded in (both depositories) and our market, then get that recognition of being more globally accessible through these partnerships,” Mambo said.