Investors at the Nairobi Securities Exchange (NSE) can now borrow stocks and bonds from each other and pay them back at a later date after the regulator approved Securities Lending and Borrowing (SLB) in a live-market environment.

The deal was sealed after the Capital Markets Authority (CMA) officially approved an application by the Central Depository and Settlement Corporation (CDSC) to start live-market deals.

“The approval is a culmination of extensive stakeholder engagement and successful tests towards guaranteeing robust operational, risk management, and technology structures to facilitate an attractive and efficient securities lending and borrowing product,” CDSC said in a press statement.

CDSC was admitted into the CMA test environment, which is also called a Sandbox in April 2020, to test the product before releasing it to the market.

It received a letter of “No Objection” from the Retirements Benefits Authority (RBA) in September 2020, allowing pension and retirement benefit schemes to also  engage in lending and borrowing of securities as an additional investment avenue.

The corporation has on-boarded ten agents todate in a bid to facilitate the rollout of SLB to investors and is in the process of on-boarding all other Central Depository Agents to facilitate the accessibility of this new product to investors.

“We are grateful that our regulator has granted us approval to go live with SLB. This is a major milestone not only for CDSC but also for the entire market as investors have the opportunity to earn positive returns from the stock market during both bull and bear market conditions,” said the CDSC’s Chief Executive, Nkoregamba Mwebesa.

Market competitiveness

The move is expected to market activities at the bourse which is facing depressed market participation with investors targeting less than ten counters.

This will have a positive effect on market liquidity and other products such as short selling and day trading, thereby increasing our market’s competitiveness both regionally and globally.