The Nairobi Securities Exchange (NSE) is stepping up efforts to deepen the derivatives market as the bourse plans to improve liquidity, broaden investor access, and roll out new financial instruments amid rising interest in risk management tools.

This hass seen the bourse tap one of the country’s top investment banks to play a central role in the derivatives ecosystem.

Accordingly, Sterling Capital has been appointed as a market maker in the NEXT Derivatives Market, signaling what market observers see as a pivotal step in NSE’s 2025–2029 strategic plan to revive capital market activity.

As a market maker, Sterling Capital will be responsible for providing continuous bid and ask quotes within reasonable spreads an arrangement expected to significantly enhance market efficiency and boost investor confidence.

“The appointment of Sterling Capital as a market maker is a key milestone and reaffirms our commitment to building a globally competitive derivatives market,” said NSE Chief Executive Frank Mwiti. “These products will help broaden retail participation, given their low entry point and the flexibility to benefit from both upward and downward market movements.”

Underdeveloped market

Derivatives are financial contracts whose value is derived from an underlying asset such as equities, interest rates, or commodities and are often used for hedging or speculation. Although common in more mature markets, Kenya’s derivatives space remains underdeveloped, with liquidity constraints and limited awareness posing ongoing challenges.

Sterling Capital Chief Executive David Ngaine said the appointment reflects the firm’s commitment to deepening capital markets through innovation and wider participation.

“This is a significant step forward in the development of the derivatives market in Kenya,” he noted. “Our role will help enable more efficient price discovery, enhanced market depth, and smoother execution for all participants.”

The collaboration also comes as the NSE prepares to introduce new derivative products, including options contracts, which have already received regulatory approval from the Capital Markets Authority. These products are expected to launch in the coming months.

Analysts say the move to engage market makers is critical if Kenya hopes to develop a vibrant derivatives market. By narrowing spreads and improving execution, market makers play a key role in attracting institutional investors and active traders who rely on tight pricing and liquidity.

The NSE, which is a full member of the World Federation of Exchanges and the African Securities Exchanges Association, views derivatives as a strategic growth pillar especially amid increased global volatility that has heightened demand for risk mitigation instruments.