After championing for the implementation of day trading in equity securities as part of its strategic objective to enhance liquidity, the Nairobi Securities Exchange (NSE) formally kicked off day trading of shares this Monday, which it hopes will raise market turnover by allowing investors to carry out multiple trades on stocks within a session. The program starts with unleveraged intra-day trading and will expand to cover leveraged day trading enabling participants to buy and sell the same company shares several times during a single day looking to make gains from small price movements, sometimes riding on events that sway share prices.
“Day trading is a welcome move for local investors who have previously lobbied for the activation of the intraday trading, as they seek to take advantage of intra-day price movements and increase their profit margins. We are confident of a bullish market performance going forward,” said NSE chief executive Geoffrey Odundo in a statement last month when they got CMA approval.
All investors who currently have accounts at the Central Depository System (CDS) will be able to take part in day trading. There are 65 listed securities in the trading system. Non-leveraged trading means buy orders can only be taken if the client has enough cash in their broker’s back office account and sell orders if they have the securities in their account.
Trades are handled by the Central Depository and Settlement Corporation (CDSC), which provides clearing, settlement, and depository services for listed securities. The trading broker has to set it up for all clients as only trades executed on the same day for the same security on the same CDS account with a single broker will qualify for selection as day trades. The NSE has offered a small 5% discount on the subsequent trades to encourage day trading.