CMA eyes low costs to boost market activity

The Capital Markets Authority (CMA) has set its sights on effecting lower transaction costs to boost trading at the Nairobi Securities Exchange (NSE). Among the initiatives sought include direct listings and controlling pricing for essential market data to increase its access to various market intermediaries. Direct listings would allow companies to list shares on the NSE without hiring banks to underwrite the transaction as is the case in an Initial Public Offer (IPO). The procedure would allow entities seeking public listings to skip underwriting fees which represent the single largest costs associated with IPOs. Other jurisdictions such as the US have recently moved to allow direct listings with the Securities and Exchange Commissions (SEC) approving direct listings on the New York Stock Exchange (NYSE) in December. Meanwhile, the CMA is reviewing costs associated with market data access as it views data liberalisation as central to increasing activity particularly among retail investors. “There is room for much more valuable data that can be more useful. Depending on the purpose of data, there is a rationale for charging a fee the question is how much it should be in a way that its not inhibitive to those who wants to use it,” said CMA Director for Regulatory Policy and Strategy Luke Ombara said. The liberation of data prices and access has however been a cause of conflict between regulators and market intermediaries with actors in the US suing the SEC for curbing market power for profit centred exchanges. In Kenya, the NSE charges a Ksh.117,000 annual fee for daily data sets translating to a daily fee of Ksh.350 for each set of equities and traded bonds. The exchange however offers a 90 per cent discount to students and academic researchers. The NSE made about Ksh.36 million in revenues from data information services in 2020. The cost of market data in Kenya however appears non-inhibitive with the CMA yet to receive any complains or references over prohibitive costs to market data access. The direct listing proposal could however fail to lift off in Kenya with 71 per cent of stakeholders surveyed by CMA last week indicating the initiative cannot work in the local market. Direct listings are for instance highly exposed to risks such as volatility in pricing and low demand. The proposals are part of the capital markets regulator review of rules governing trading which is set for completion by June. The CMA is currently reviewing various regulations after a decade including public offers and listings, whistle-blower regulations, share buy-back guidelines, crowdfunding regulations and credit rating guidelines.

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