NSE derivative deals hit Ksh.168.5 million in two years

Over Ksh.168 million has been transacted on the nascent Nairobi Securities Exchange (NSE) derivatives counter, two years since the launch of the segment in July 2019.

Deals in the first half of 2021 have been nearly seven times greater over a similar period last year while the average daily turnover level has nearly quadrupled in the same period.

The derivatives market dubbed NEXT is only the second such market on the continent after South Africa.

A derivative, composed from the word ‘derive’, describes a financial security with a value that is reliant upon an underlying asset or group of assets including stocks, bonds, commodities, currencies, interest rates and market indexes.

The derivatives are used primarily in hedging a position or speculating on the directional movement of underlying assets.

During the uncertainties created by the COVID-19 pandemic, investors leveraged the securities to manage risks emanating from trading/ already established market positions.

NSE’s NEXT comprises of stocks from large cap companies including Safaricom, KCB and Equity Group and the NSE 20, 25 indexes.

Over the past two years of its existence, the NSE has added a mini NSE 25 index futures contract and real time market data for the segment to spur investor activity.

To enhance market uptake, the NSE says it continues to engage key stakeholders including addressing the need to update investment policy statements (IPS) governing local institutional assets with administrators and on-boarding online trading members who have built a sizable community of active retail investors.

“The response towards NEXT demonstrates the confidence the market has despite a constrained and tough economic environment due to the COVID-19 Pandemic. We are proud to cross the two year mark and to be an Exchange leading in innovation in line with one of our key priority areas to increase product uptake of our alternative products by our investors,” noted NSE Chief Executive Officer Geoffrey Odundo.