The Kenya Capital Market Authority, CMA, has given the Nairobi Stock Exchange, the go-ahead to initiate day trading in the Kenyan market.
Consequently, day trading will commence at the Exchange on November 22, 2021.
This is part of the Government of Kenya and the Capital Market Authority’s efforts to enhance market liquidity.
What is day trading?
Day trading is the practice of buying and selling a security within a single day, or within a trading session or even doing so multiple times over the course of the day.
As a motivation to get day traders to the market, the Board of the Nairobi Stock Exchange has approved a discount on trade transactions cost. The exchange usually charges 0.12% commission on trades, but for day traders, that has been reduced to 0.114% on the second leg of transactions.
This implies that the usual 0.12% will be charged on the buy trades but the sell trades will attract 0.114% commission. For short-sellers, the 0.12% will be charged on the short sell, while the 0.114% will be charged on the buy to cover trades.
In preparedness for the day trading activities, the Exchange commissioned a new trading system in 2019, a system that has helped separate trading and post-trading activities. Such separation has also enabled the Exchange to introduce new financial products like Covered Short Selling and Day Trading with the hope that those would lead to the revolutionization and strengthening of the Nairobi Exchange as the “preferred investment hub for the region.”
According to the CEO of the Exchange, Mr Geoffrey Odundo, “Day trading is a welcome move for local investors who have previously lobbied for the activation of the intraday trading, as they seek to take advantage of intraday price movements and increase their profit margins.
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“We are confident of a bullish market performance going forward,” he said.
Speaking in agreement with Mr Odundo and reiterating on the value day trading could add to the Exchange and the market, the Chairman of the Exchange, Mr Kiprono Kittony, EBS, noted that “Day trading will allow investors to trade on one position, two or three times per day. This will significantly increase our turnovers and attract more investors to the bourse, further entrenching the NSE as an innovative and transformational Exchange in the region.”
Not only will the introduction of day trading enhance the liquidity of the Kenyan market, but it is also hoped that it will increase investor participation in the market. It is also expected that it would help the market rebound more strongly from the effects of Covid-19.
So, for any Nigerian wishing to profit from activities in the Kenyan market, the introduction of Day Trading may be good news.