Day Trading: Kenya Decides to Move into the Future

Day trading is about to become a reality for stock traders on the Nairobi Securities Exchange (NSE), Kenya’s main exchange platform for stocks, bonds and other financial products.

The Central Depository and Settlement Corporation (CDSC), the entity that provides settlement and depository services for stocks on the NSE, recently said it has acquired software system that will enable it to support day trading starting April 2017. CDSC is about to begin trial of the system this year with the test limited to stockbrokers initially.

Day trading enables investors to buy and sell shares on the same day, thus allowing them to profit from short-term movements in stock prices. Today it takes at least three days to complete a stock trade on the NSE. But once the software is installed, CDSC will provide same-day settlement and that is expected to improve liquidity on the NSE as faster settlement would allow for more daily transactions than presently possible. CDSC is currently handles up to 30,000 transactions a day.

More products
Rose Mambo, the CEO of CDSC, promised that they will offer more new services and products for trading on the NSE once the day trading system is in place. Among the new services will be the ability to lend and borrow shares on the NSE, but it is not clear whether that would pave way for short trades on the exchange.

Kenyan investors would also access and trade Nigerian stocks once CDSC installs the day trading support software.

Day trading subject to law amendment
The rolling out of day trading infrastructure by CDSC will depend on the whether the regulators agree to give it a nod. The stock market regulator, the Capital Markets Authority (CMA), and monetary regulator, the Central Bank of Kenya (CBK), will have to review their existing rules to allow for same-day settlement of stock trades.

But it is not clear whether the review of the trading and settlement rules would also lift the percentage limit on stock price movements. Kenya capped daily stock price movements to 10%. Retaining the limits could put off many speculative traders who try to profit from short-term but large movements in stock prices.