NSE prepares for public listing
By Kimathi Njoka
The Nairobi Stock Exchange (NSE) may be a publicly quoted company trading at the bourse before the end of the year.
This is one of corporate milestones being worked out by NSE, months after it commenced electronic trading of stocks in September last year.
The development known as demutualisation is expected to result to ownership and management rights being clearly identifiable and separable from trading rights of the members of the stock exchange.
NSE chief executive Chris Mwebesa told The Standard a consultant has been hired to carryout a study whose recommendations will form the basis of the listing.
Mwebesa said the consultancy firm, Ernest & Young hired last year, has submitted an interim report and is expected to present a second report in the next few months, which may pave way for demutualisation.
Once the separation of the two roles is done, the stock exchange can list itself.
If all goes as per the plan, NSE will become the second bourse in Africa after Johannesburg Stock Exchange (JSE)to walk the route. The trend is entrenched in London and in Germany where the Exchanges operate like private companies.
The process will involve creating a share capital for the NSE and subsequently start trading as a publicly quoted company.
"Demutualising the NSE will transform it from a company limited by guarantee to a company limited by shares," Mwebesa said.
Stock Broker, Mr Job Kihumba adds that separating the ownership and trading rights is crucial in ensuring proper monitoring and regulation of members and market participants.
Currently, the NSE is a member-owned company whose board membership has more representatives of stockbrokers than other market participants.
This has posed a challenge to the enforcement of regulations on errant stockbrokers.
Mwebesa says the move is informed by a worldwide trend of separating ownership of the exchanges from owning rights.
Experts also contend that demutualising the NSE could pave way for a possible merger with the Uganda Securities Exchange (USE)-once USE follows suit.
The two Exchanges recently entered into a deal, which made it easier for companies in the two countries to cross-list their shares at the two bourses.
Currently, only Kenya Airways, East African Breweries and Jubilee Holdings are cross-listed.
This will be a radical departure from the current trend where most bourses were created by governments not as profit-making ventures and, therefore, run by members for the interest of the public.
But with demutualisation, the NSE will now be run as a business for profit, which will be beneficial to the members.
However, whereas the recommendations of the consultant will inform the way forward for the NSE, the final decision on whether to list or not will be dependent on stakeholders including stock brokers, Capital Markets Authority (CMA) and investment banks.
Experts are however warning that the envisaged benefits to members will depend on the regulations that will be put in place.
"The regime that will be put in place by the regulator (CMA) will determine whether it will be better or worse".
Established more than four decades ago, the NSE has come along way in both market capitalisation and number of listed companies.
Currently, 54 companies are listed at the bourse. Automation of trading has seen a surge in activity and settling of transactions.
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Wednesday, February 14, 2007
NSE prepares for public listing