Market infrastructure - Kenya

This document provides a comprehensive overview of the key financial market infrastructures, regulatory bodies, and core institutions operating within the Republic of Kenya.

Market Overview

The Kenyan financial market is one of the most developed in East Africa. Its infrastructure is centered around the Central Bank of Kenya (CBK), which provides payment and settlement services and the depository for government securities (Treasury Bonds and Treasury Bills); the Central Depository & Settlement Corporation (CDSC), which handles equities and corporate bonds; and the Nairobi Securities Exchange (NSE), the country's main trading venue. The entire framework is supervised by the Capital Markets Authority (CMA), the principal market regulator.

Institutions and organisation

Central Bank/Regulators

Central Bank of Kenya (CBK) - (www.centralbank.go.ke)

Established in 1966, the CBK is the primary financial authority in the country. Its mandate includes formulating and implementing monetary policy, fostering the stability and proper functioning of the financial system, and acting as the banker for the government. The CBK operates the country's main payment system, regulates commercial banks, and serves as the CSD and settlement system for all government securities. CBK is the registrar for Government debt securities. In March 2022, the CBK advised of plans to launch a new CSD system DhowCSD, which went live in July 2023.

Capital Markets Authority (CMA) - (www.cma.or.ke.)

The CMA is the statutory body responsible for regulating and developing the Kenyan capital markets. Its key functions include the licensing of all market intermediaries, the supervision of the securities exchange, and ensuring the proper conduct of all market participants to protect investors. The CMA was instrumental in the establishment of the CDSC and the demutualisation of the NSE.

Stock Exchanges and related institutions

Nairobi Securities Exchange (NSE) - (www.nse.co.ke)

The NSE, which began operations in 1954, is the sole securities exchange in Kenya for equities and operates the derivatives market known as NEXT. The NSE is licensed and regulated by the Capital Markets Authority (CMA). It provides the platform for trading equities, corporate bonds, and government bonds through its Automated Trading System (ATS). Since 2016, the NSE has been recognized as a Self-Regulatory Organisation (SRO) under the supervision of the CMA.

Automated Trading System (ATS) is operated by the NSE.

Payment Systems

The Central Bank of Kenya supervises and operates the nation's key payment infrastructures.

Kenya Electronic Payments and Settlement System (KEPSS)  

Operated by the CBK, KEPSS is the country's Real-Time Gross Settlement (RTGS) system. It processes large-value and time-critical payments in real-time, serving as the core system for settling the cash leg of all securities transactions.

Nairobi Automated Clearing House (ACH)

Managed by the Kenya Bankers Association (KBA), the ACH is the primary system for clearing low-value, bulk retail payments, including cheques and electronic fund transfers.

Securities Settlement Systems (SSS)

Kenya operates two distinct securities settlement systems depending on the asset type.

Central Depository & Settlement Corporation (CDSC) - (www.cdskenya.com)

The CDSC is responsible for clearing and settling on-exchange transactions for equities and corporate bonds. The settlement of these securities occurs on a T+3 cycle, with the final cash leg settled through the KEPSS RTGS system.

DhowCSD - Central Bank of Kenya (CBK)

The CBK manages the settlement system for government securities (Treasury Bills and Treasury Bonds). DhowCSD has its own dedicated Swift BIC code separated from the RTGS of the Central Bank. In March 2022, the CBK advised of plans to launch a new CSD system DhowCSD, which went live in July 2023. Its securities settlement system adopted usage of MT53s series messages and facilitates the opening of CSD accounts automatically.