DIGITAL

EGM's online tool to allow investors transfer securities in two hours

In Summary
  • Common underlying instruments include bonds, commodities, currencies, interest rates, market indexes, and stocks.
  • Investors can protect their portfolios against adverse price movements by trading futures that reflect their stock portfolios.

EGM Securities is Kenya’s first online trading broker to offer derivative contracts on the Nairobi Securities Exchange (NSE) Derivatives Market.

A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset.

Common underlying instruments include bonds, commodities, currencies, interest rates, market indexes, and stocks.

NSE derivatives contracts are based on the most liquid traded equities and index in Kenya. 

The offering will provide investors with a new onboarding process that will take less than five minutes to start trading as opposed to the current average two-day processing time, putting Kenya at par with global standards. 

According to EGM Securities CEO Samwel Kiraka, the online platform will allow buy in the morning and sell in the afternoon, across all trading platforms, including MT4, Webtrader, and Kenya’s well-known FXPesa.

He said that this was made possible through collaboration between the NSE Derivatives Market, EGM Securities and its parent company Equiti Group.

“We are proud to be an Exchange leading in innovation and one of our key priority areas for 2021 is to increase product uptake on the alternative products to our investors,’’ NSE CEO Geoffrey Odundo said.

EGM Securities will initially introduce futures contracts on the six most traded Kenyan stocks; British American Tobacco Kenya, KCB Group Plc, Equity Group Holdings, Safaricom Plc, East African Breweries Plc and ABSA Bank Kenya Plc, as well as the NSE 25 Index created to cover 25 of the most liquid and blue chip stocks in Kenya. 

The main benefits of trading on the NSE Derivatives Market versus the cash equity equivalent include the ability to short sell Kenyan cash equities, lower margin costs and lower transaction costs at a flat rate of 0.14 per cent.

Investors can protect their portfolios against adverse price movements by trading futures that reflect their stock portfolios.

In 2018 EGM Securities, a subsidiary of the global Equiti Group, became Kenya’s first online trading broker to obtain a license from the Capital Markets Authority, and in 2019 the company launched its FXPesa trading App.

On October 15 last year, 2020, it was admitted as a trading member of NEXT on the NSE. The admission follows EGM Securities' satisfaction of the licensing and operating requirements of a Derivatives Broker as stipulated under the Capital Markets, Derivatives Markets Regulations, 2015. 

NSE chairman Kiprono Kittony said to enhance uptake, the bourse continues to engage with key stakeholders, specifically concentrating its efforts towards, enhancing the knowledge and training of key market participants.

''By doing so, we address the need to update Investment Policy Statements (IPS) that govern local institutional assets with administrators, trustees and fund managers; and onboarding of online trading members who have built a sizeable community of active retail investors,’’ Kittony said.