Hello good people? Welcome to evefinancialinsights blog where we
discuss all things finances. Have you ever wondered how the stock market
operate and how you can invest in securities? Well this article provides every information
you need. After all we are here to equip and transform your financial life for
better.
The Nairobi Stock Exchange (NSE) is the main securities exchange
in Kenya. The exchange is a member of the African Securities Exchanges
Association (ASEA) and the East African Securities Exchanges Association
(EASEA). It was founded in 1954 as the Nairobi Stock Exchange and became a
self-regulating organization in 1984. In 2020, the exchange rebranded to the
Nairobi Securities Exchange (NSE) after the demutualization of the exchange.
This move enabled the exchange to become a public company limited by shares and
to attract more investors.
Trading hours:
The NSE is open for trading on weekdays from Monday to Friday.
Trading on the exchange takes place from 9:30 a.m. to 3:00 p.m. East African
Time. The exchange is closed on weekends and public holidays. The trading hours
of the exchange are subject to change depending on market conditions.
Market segments:
The Nairobi Securities Exchange has two primary market segments:
the Main Investment Market Segment (MIMS) and the Growth Enterprise Market
Segment (GEMS).
Main Investment Market Segment (MIMS): The MIMS is the primary
market segment of the NSE. It is designed for larger companies that meet the
listing requirements of the exchange. Companies listed on the MIMS must meet
the minimum listing requirements set by the Capital Markets Authority (CMA).
The MIMS has strict disclosure requirements and offers investors a range of
investment opportunities in various sectors such as banking, insurance,
manufacturing, and agriculture.
Growth Enterprise Market Segment (GEMS): The GEMS is a secondary
market segment of the NSE. It was created to provide smaller companies with
access to the capital markets. The GEMS was established in 2013 and offers
investors an opportunity to invest in emerging companies. The GEMS has lower listing
requirements than the MIMS, and companies listed on the GEMS can migrate to the
MIMS once they meet the listing requirements.
Listing requirements:
To list on the NSE, a company must meet the minimum listing
requirements set by the Capital Markets Authority (CMA). The listing
requirements are designed to ensure that listed companies have adequate
disclosure, governance, and financial transparency. The minimum listing
requirements for companies listed on the MIMS and GEMS are as follows:
Main Investment Market Segment (MIMS):
1.
Minimum paid-up capital
of KES 50 million
2.
Minimum number of
shareholders of 1,000
3.
Minimum public float of
25% of the issued share capital
4.
At least three years of
audited financial statements
5.
A track record of
profitability and dividend payment
6.
A board of directors
with a majority of non-executive directors
7.
Compliance with the
corporate governance guidelines issued by the Capital Markets Authority
Growth Enterprise Market Segment (GEMS):
1.
Minimum paid-up capital
of KES 10 million
2.
Minimum number of
shareholders of 50
3.
Minimum public float of
15% of the issued share capital
4.
At least one year of
audited financial statements
5.
A track record of
profitability and dividend payment (not mandatory)
6.
A board of directors
with a majority of non-executive directors
7.
Compliance with the
corporate governance guidelines issued by the Capital Markets Authority
Trading and settlement:
The NSE uses an automated trading system known as the Automated
Trading System (ATS). The ATS is a computerized system that enables investors
to buy and sell securities online. The ATS offers investors real-time access to
market information, allowing them to make informed investment decisions.
Settlement of trades on the NSE is done through the Central
Depository and Settlement Corporation (CDSC). The CDSC is a subsidiary of the
NSE and is responsible for the custody and settlement of securities traded on
the exchange.
How to trade stocks at Nairobi stock exchange
To trade stocks at the Nairobi Stock Exchange, you will need
to follow these steps:
1.
Open a brokerage account: You will
need to choose a licensed stockbroker to buy and sell stocks on your behalf.
Contact a licensed stockbroker in Kenya and open an account with them. They
will guide you through the process and help you fill in the necessary forms.
2.
Fund your account: Once you have
opened an account, you will need to deposit money into it to buy stocks. You
can do this through a bank transfer or mobile money.
3.
Research the stock market: Before
you start trading, it's important to understand the stock market and the
companies you want to invest in. You can do this by reading financial news,
company reports, and other sources of information.
4.
Place your order: Once you have
chosen the stock you want to buy, contact your broker and place an order. You
will need to provide the name of the company, the number of shares you want to
buy, and the price you are willing to pay.
5.
Monitor your investment: After
buying stocks, it's important to keep track of your investment. You can do this
by monitoring the stock price, reading financial news, and keeping up with
company reports.
It's
important to note that trading stocks can be risky and you should only invest
what you can afford to lose. Consult with a licensed financial advisor before
making any investment decisions.
See you on the next blog.
