Nairobi SE broker backoffice system to support online share trading

The Nairobi Stock Exchange has bought a new broker back office (BBO) system which it hopes will boost liquidity and attract listings, including offering online trading. The exchange and the vendor, Chella Software of India, are training personnel at stockbrokers, investment banks and others and aim to go live this month (March). The system cost KSh75 million (US$880,000).
The BBO system will reduce fraud and make it easier for brokers to offer online trading to their clients. Peter Mwangi, chief executive of the NSE, was quoted in local media as saying: “We expect to go live by the end of the first quarter (March).”
The BBO system will be integrated in brokers’ management and accounting information systems and offers end-to-end automated solutions with seamless integration to electronic trading, central depository and the national clearing and payment systems. Brokers whose clients trade online will earn commissions on trades.
The BBO is part of market reforms to restore investor confidence. There had been uproar when some rogue brokerage firms failed after trading shares without their clients’ consent. The Capital Markets Authority and the NSE will automatically track all transactions and the system will limit other malpractices.
Stockbroking members were free to choose to use the centralised system, controlled by the NSE, or to create or buy their own systems. The NSE website lists 20 broking members of which 2 are under statutory management. An estimated 95% of the stockbrokers reportedly chose the centralized system as it will cut their costs. The NSE BBO system costs KSh2 mn plus approximately KSh136,000 in monthly charges.
Mwangi told Reuters in an interview: “Market players can now spend more time on value addition such as research, providing advice to investors and enhancing portfolio management for the investment bankers. This system has better controls and balance against malpractice, improving risk management and easing compliance and surveillance for the NSE and Capital Markets Authority,”
The CMA established an internal anti-fraud unit, which has so far recovered millions of shillings stolen in unauthorised transactions. It posted a list of alleged fraudsters.
Mwangi believes the BBO system will attract new investors, especially young people, and increase the participation of retail investors: “The demographics of the markets are changing … young people are early adopters of technology. They are tech savvy, always online and are on their mobile phones. This offering addresses them.”
Kenyans in North America and Europe send home the majority of some $50 mn a month, some for investing in property and securities. They will be able to trade online or queue orders for when the market opens if the time differences are too great.
Mwangi told Reuters: “The more investors you have, the more you are able to mobilise domestic borrowing for investments, raise the level of savings, market capitalisation and turnover.” He also expects it will be more attractive for companies to be listed for trading on teh NSE: “To list new companies you have to show them you have a liquid market and investing in technology helps you demonstrate that.”


Leave a Reply

Your email address will not be published. Required fields are marked *