NSE gets greenlight to self-regulate

The Nairobi Securities Exchange (NSE) has received formal recognition as a self- regulatory organization (SRO) from the Capital Markets Authority (CMA), which will allow the exchange more say in admission of new listings in the market.

The NSE said it has been granted the SRO status after successfully separating the management structures for its commercial and regulatory functions in line with the Capital Markets (Demutualisation of the Nairobi Securities Exchange Limited) Regulations of 2012.

The mandate of the exchange as an SRO will include admission to listing on new offers, monitoring the compliance of set obligations by companies looking to raise capital in the market, admission of trading participants and oversight of the market’s trading participants.

“As we ready ourselves for the launch of the derivatives market, this milestone allows us to be the first line regulator for the market with an overarching goal of preserving market integrity and protecting investors,” said NSE chief executive officer Geoffrey Odundo.

Partial self-oversight

The NSE had already been granted partial self-oversight, such as being allowed to approve new Growth and Enterprise market Segment (Gems) listings coming onto the market in cases where the companies were listing by introduction.

The CMA mooted the plan to have the NSE become a self-regulating entity in its 10-year masterplan, which was to kick in once the NSE became fully demutualised.

The CMA said in the masterplan that a demutualised exchange would be given the authority to set its own fees, create and enforce industry regulations and standards, helping it obtain and allocate the resources it needs to rapidly respond to market developments and opportunities.

In granting the self-regulation, the CMA has changed its previously held position, as set out in the Capital Markets Amendment Bill 2013, where the regulator had said the exchange would not be allowed to set its own fees as this was open to abuse.