•The Regulatory Sandbox allows live testing of innovations under a less onerous regulatory regime.
•Others on the Regulatory Sandbox include Innova Limited and Pezesha Africa Limited.
The Central Depository and Settlement Corporation (CDSC) has been admitted to the Capital Markets Authority (CMA)'s Sandbox, becoming the fourth entity to join the platform.
Joining the Regulatory Sandbox now paves way for the testing of its proposed screen-based Securities Lending and Borrowing (SLB) platform, for a period five months effective April 7.
CDSC is counted on to enhance liquidity in the capital markets through its SLB model, which has enormous potential if successful, CMA acting CEO Wyckliffe Shamiah said.
“Making the Kenyan capital markets vibrant and liquid is a key priority for the capital markets industry, which is aligned to the ambitions of the Regulatory Sandbox to facilitate this through innovative solutions,” Shamiah said.
While the Capital Markets (Securities Lending, Borrowing and Short-Selling) Regulations 2017 envisages a bilateral model of SLB, the test of the screen-based model will ensure that any investor can perform an SLB transaction through approved Central Depository Agents.
If the test is successful, the current Securities Lending and Borrowing Regulations will be amended to include the screen-based model and address other issues which have hampered the uptake of the bilateral SLB product.
The CDSC initiative is aligned to CMA's mandate of promoting the development of Kenya’s capital market to be an investment destination of choice.
This is through facilitative regulation and innovation anchored in the Strategic Plan (2018-2023) and the Capital Market Master Plan (2014-2023).
CDSC is the fourth firm to be admitted to the Regulatory Sandbox. Others include Innova Limited and Pezesha Africa Limited.
Innova is testing its cloud-based data analytics platform, while Pezesha is testing an internet-based crowd-funding platform through which investors can provide loan facilities for Small and Medium Enterprises.
The third fintech chose to remain anonymous when it joined.
“The Regulatory Sandbox allows live testing of innovations under a less onerous regulatory regime and is expected to attract fintech companies and existing capital markets licensees to test the application of technology to financial services,” Shamiah noted.
Sandbox participants are required to comply with minimum regulatory requirements prescribed by the Regulatory Sandbox Policy Guidance Note (PGN).
They include submission of test plans, which outline key test objectives,testing metrics, performance indicators, safeguards and remedial measures for test clients.
Upon exit from the Sandbox, participants could be granted a license or approval to operate in Kenya subject to compliance with existing legal and regulatory requirements.