In a groundbreaking development, the Capital Markets Authority (CMA) of Kenya has granted a trading license to the East African Bond Exchange (EABX), breaking the Nairobi Securities Exchange’s (NSE) monopoly in the bonds market. Over-the-Counter (OTC) trading, commonly utilized for unlisted securities or substantial block trades, is now in the spotlight as EABX enters the scene, intensifying competition.

This strategic move is a result of the Treasury’s commitment to revitalizing the Kenya Bond OTC Markets initiative, aimed at enhancing market depth and liquidity for Government bonds. By focusing on efficient pricing and transparency, the initiative seeks to transform Kenya’s bond market into a decentralized securities exchange.

The Q4 2023 Soundness Report from CMA highlighted renewed and active industry-wide efforts, spearheaded by the CS for Treasury, to breathe new life into the Kenya Bond OTC Markets initiative. The goal is to foster increased market depth and liquidity for Government bonds, creating a more dynamic and transparent marketplace.

Aligning with these efforts, the CMA’s approval of a license for EABX signifies a significant step toward facilitating OTC bonds trading in Kenya, challenging the existing dominance of the NSE. Business Daily reported on this noteworthy development.

For those unfamiliar with Over-the-Counter (OTC) trading, it involves the direct exchange of securities between two independent parties, providing an alternative platform for trading outside traditional exchanges.

In addition to the evolution in the bonds market, Kenya’s capital markets are witnessing a rise in the prominence of money market funds (MMFs). These funds have become the preferred investment avenue for both individuals and institutions seeking stability and modest returns on their capital.

As the East African Bond Exchange emerges as a formidable player, the dynamics of Kenya’s capital markets are set to undergo a transformative shift, introducing healthy competition and paving the way for a more diverse and dynamic financial landscape.

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