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Capital Markets Authority (CMA) is proposing amendments to its regulatory framework to introduce Margin Trading at the Nairobi Securities Exchange (NSE), aligning with its strategic objectives to adapt to changing market dynamics and technological advancements.

Margin Trading, allowing investors to purchase securities through borrowing funds from a broker, was recommended in a 2015 World Bank Report to enhance liquidity in Kenyan Equity Markets.

It has been successfully implemented in various countries, including the USA, China, Nigeria, Japan, Thailand and India.

According to Wyckliffe Shamiah, CEO of CMA, the regulatory review aims to keep pace with market trends and stakeholder demands.

He said Margin Trading has the potential to boost both the supply and demand for securities, thus ensuring the stability and integrity of financial markets.

“The regulatory review seeks to adapt to evolving market trends, technological advancements, and emerging stakeholder expectations,” Shamiah stated in a press release.

The authority has solicited feedback from stakeholders on the draft Guidelines and Regulations until April 11, 2024.

Shamiah clarified that margin financing would enable investors to access significant amounts of undervalued securities or those affected by negative news or sentiments, yet poised for potential recovery. Margin Trading will be overseen by Trading Participants approved by the CMA.

Alongside Margin Trading, the CMA has revised the Financial Resource Requirements for Market Intermediaries, introducing new license categories such as Intermediary Service Platform Providers, Broker-Dealers, Trustees, Custodians, and Money Managers.

Further, amendments to the Commodity Markets Regulations 2020 introduce regulatory oversight fees for licensed entities in the commodities sector.