The Capital Markets Authority (CMA) of Kenya has granted the East African Bond Exchange (EABX) a license for Over-the-Counter (OTC) trading.
The market regulator issued a license to EABX on Tuesday, 27, a development that will set a competitive landscape between the Nairobi Securities Exchange (NSE) and EABX for bond market operations, where the annual turnover has averaged KES 734.0 billion from 2020 to 2023.
An OTC market is an infrastructure that allows traders to interact without having to go through a formal securities exchange. it works purely through bilateral negotiations between traders without the intervention of the established securities exchange since all trades are captured electronically and directly between the engaging parties paraphrase.
This milestone marks the third milestone for EABX with the first having been the no objection for set up acquired in 2020 and the second being the approval for capital raising secured in 2023.
In the Q4 2023 Soundness Report, the Capital Markets Authority (CMA) highlighted a resurgence of comprehensive industry initiatives led by the Treasury Cabinet Secretary.
These efforts aim to rejuvenate the Kenya Bond OTC Markets initiative, emphasizing the enhancement of market depth and liquidity for Government bonds through transparent pricing mechanisms.
The NSE generated an average annual income of KES 73.2 million from bond levies in the last two years, and there is a potential loss of revenue if bond market activity shifts towards EABX.
Additionally, bond dealers in brokerage firms may experience financial impact if the Over-the-Counter (OTC) market gains traction, solidifying direct interactions between traders.
