This contributed to increased turnover The Electronic Trading System ETS

This contributed to increased turnover the electronic

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share trading became electronic via the Central Depository System. This contributed to increased turnover. The Electronic Trading System (ETS) recently implemented (2007) is also expected to increase turnover and efficiency at the bourse (Gichangi, 2014). The Nairobi Securities Exchange has played an increasingly important role in the Kenyan economy, especially in the privatization of state-owned enterprises. Public enterprises have been successfully privatized through the NSE where the government has raised billions of shillings. The first privatization exercise was the sale of 20% government stake in Kenya Commercial Bank. Kenya airways followed in 1996. To encourage FDIs, the government introduced several incentives for capital markets growth including tax free Venture Capital Funds, removal of capital gains tax on insurance companies’ investments, allowance of 6
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beneficial ownership by foreigners in local stockbrokers and fund managers (Bitok et al., 2015). For the first time since the formation of the NSE, the number of stockbrokers increased with the licensing of 8 new brokers. In 1995, The Kenyan Government relaxed restrictions on foreign ownership in locally controlled companies subject to an aggregate limit of 20% with any single holding not exceeding 2.5%. To help encourage foreign portfolio investments these were doubled to 40% and 5% respectively in the June 1995 budget. The entire Exchange Control Act was repealed in December 1995. Seven more stockbrokers are licensed, bringing the number to twenty from the original six (one of which still survives) at the inception of the exchange in 1954. Commission rates were reduced considerably from 2.5% to between 2% and 1 % on a sliding scale for equities and 0.0625% for all fixed interest securities. Kenya adopted International Accounting Standards (IAS) in 1999 (The NSE Market Fact File, 2016). Implementation of live trading on the automated trading systems (ATS) at the NSE commenced in September 2006 and trading hours increased from two to three hours, 10:00 am –1:00 pm. Other innovations included the removal of the block trades board and introduction of the functionality for the trading of rights in the same manner as equities. Besides trading equities, the ATS is also fully capable of trading immobilized corporate bonds and treasury bonds. The anticipated benefits of the new system include greater transparency in the placement of bids and offers. The system will also improve market surveillance and transmit almost in real time, trading information relating to index movements and price and volume movements of traded securities. More current information will become readily available to a wider constituency of our stakeholders, facilitating the decision-making process and lowering the risk of participating in our markets. As such the Exchange views a situation where it will soon have an opportunity to enhance its revenue streams through information vending to our stakeholders (Masila, 2005).
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