CBK to lose grip on Trea­sury bonds in a pro­posed merger

A sin­gle de­pos­i­tory sys­tem will con­tain costs of in­tro­duc­ing new se­cu­ri­ties, in­clud­ing commodities ex­change and de­riv­a­tives, says CDSC chief ex­ec­u­tive Rose Mambo

The Star (Kenya) - - News - CON­STANT MUNDA @munda­con­stant

The Na­tional Trea­sury has com­mis­sioned a study to in­form the im­ple­men­ta­tion of a long-stand­ing plan to have shares, cor­po­rate and gov­ern­ment bonds un­der one cus­tody.

This will see the Cen­tral Bank lose its con­trol of the gov­ern­ment se­cu­ri­ties, a de­vel­op­ment that has scut­tled Nairobi Se­cu­ri­ties Ex­change’s pro­posed takeover of the Cen­tral De­pos­i­tory and Set­tle­ment Cor­po­ra­tion.

PS Ka­mau Thugge said the merger of the cen­tral de­pos­i­to­ries at the Cen­tral Bank for gov­ern­ment bonds and that at the CDSC will pro­mote a “sound and ef­fi­cient fi­nan­cial sys­tems”.

“We are de­ter­mined to en­sure our set­tle­ment sys­tems are ef­fi­cient and con­ve­nient to in­vestors and is­suers of se­cu­ri­ties,” Thugge said in Nairobi yes­ter­day. This is an in­di­ca­tion the Trea­sury has given into pres­sure from mar­ket in­ter­me­di­aries, which started in earnest in 2011.

“We are also ex­plor­ing the pos­si­bil­ity of im­ple­ment­ing a hor­i­zon­tal set­tle­ment sys­tem ar­chi­tec­ture in line with in­ter­na­tional prac­tice.”

Thugge spoke when he of­fi­ci­ated over the re­brand­ing of the CDSC, a lim­ited com­pany formed in 1999 to pro­vide cen­tralised au­to­mated sys­tem for the trans­fer and reg­is­tra­tion of cor­po­rate bonds and shares. CDSC chief ex­ec­u­tive Rose Mambo said the Kenya’s cap­i­tal mar­ket was “too small to have two de­pos­i­to­ries”.

A sin­gle de­pos­i­tory sys­tem, she said, will con­tain costs of in­tro­duc­ing new se­cu­ri­ties, in­clud­ing commodities ex­change and de­riv­a­tives.

“The plans that are un­der­way are a re­view of what is at CDSC, what’s at the CBK and how can we unify them and bring them to­gether so that we have one de­pos­i­tory sup­port­ing the en­tire mar­ket,” Mambo said. “There is no rea­son to have two sep­a­rate in­fra­struc­ture for mar­kets our size.”

The CDSC has ac­quired a new sys­tem at a cost of be­tween $100,000 (Sh10.17 mil­lion) and $120,000 (Sh12.2 mil­lion) from South Africa to fa­cil­i­tate set­tle­ment of trade in shares within a day from April. Such trans­ac­tions presently take three days at the Nairobi Se­cu­ri­ties Ex­change.

“We ex­pect to re­ceive de­liv­ery of a ver­sion that we will go live with in Novem­ber this year,” she said. “We will then pro­ceed with test­ing, with in­te­gra­tion with our stock­bro­kers, our cen­tral de­pos­i­tory agen­cies, the NSE and by April next year, we should be ready to go live.”

The sys­tem will have ca­pac­ity to be linked to global de­pos­i­to­ries, in­clud­ing Bel­gium-based Euro­clear and Lux­em­bourg’s Clearstream.

“If we have part­ner­ships with them, then get that recog­ni­tion of be­ing more glob­ally ac­ces­si­ble,” Mambo said.

/COUR­TESY

Cen­tral De­pos­i­tory and Set­tle­ment Cor­po­ra­tion chief ex­ec­u­tive Rose Mambo (fourth left) and Na­tional Trea­sury PS Ka­mau Thugge (fifth left) with CDSC board mem­bers toast to the agency’s new brand un­veiled at the Sarova Stan­ley Ho­tel in Nairobi yes­ter­day

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