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    Developing Kenya's capital markets to be an investment destination of choice through facilitative regulation and innovation.
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    Establishing a robust, facilitative policy, legal and regulatory framework for capital markets development
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    Promoting investor education, awareness and interest in the capital markets
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Latest News Enhanced

  • Wed 01 Mar 2017


      POSITIONS ANNOUNCEMENT- CMA WEBSITE   The Capital Markets Authority is a statutory agency charged with the responsibility of regulating and developing an efficient capital market in Kenya. The Authority invites applications from dynamic, goal-oriented, high performers, with strong problem-solving skills, for the following positions:  ASSISTANT MANAGER PROCUREMENT - REF: DCS /AMP/01/ 2017 –CONTRACT   Reporting to the Director Corporate Services, the Assistant Manager Procurement will be responsible for the Management of the supply chain function at the Authority, coordinating all procurement and disposal activities thereof and coordinating the internal monitoring and evaluation of the supply chain function.   Key Duties & Responsibilities:   ·         Lead and manage the procurement function while ensuring governance and compliance with the public procurement regulations. ·         Develop, facilitate, implement, monitor & review of procurement plans. ·         Develop and streamline the procurement function in line with and in compliance to the Public Procurement Act 2005, its revisions, regulations and Government policy. ·         Develop, review, facilitate and implement management initiatives for cost reduction plans. ·         Perform secretarial role to the relevant Committees. ·         Coordinate the preparation of tenders for advertisement, opening and evaluation. ·         Recommend a negotiating team for appointment by the Accounting Officer where negotiations are allowed by the Act and Regulations participate in such negotiations and liaise with respective directorates in contract management thereof. ·         Monitor contract management by user departments to ensure implementation of contracts in accordance with the terms and conditions of the contracts. ·         Advise the Authority on aggregation of procurement to promote economies of scale. ·         Prepare and submit to the PPRA quarterly procurement reports as required. ·         Coordinate preparation of the Authority’s Annual Procurement Plans. ·         Provide information, as required for any petition or investigation to debar a Tenderer or any investigation under review procedures. ·         Liaise with PPRA and other bodies on matters related to procurement. ·         Advise directorates and staff on all matters to do with procurement of goods and services in line with the provisions of the Procurement Act and the Regulations. ·         Monitor and manage performance by implementing the Authority performance management system ·         Delegate and empower the department’s employees to perform. ·         Ensure a productive and motivated team through participative management and ongoing, open communication. ·         Adhere to required Authority and legislative procurement practices, polices and processes. ·         Identify development requirements of staff and assist them in meeting their training, coaching and mentoring requirements. ·         Draft staff work plans and ensure their implementation.   Minimum Requirements ·         A Degree in  Supplies Management or any other relevant degree ·         A post graduate diploma in Supplies Management ·         Membership to relevant professional body   Experience: Minimum of six (6) years relevant work experience   Key skills, Knowledge & Competencies ·         Knowledge of the Public Procurement Act and Regulations. ·         High level of attention to detail. ·         High integrity. ·         Good analytical skills. ·         Report writing skills. ·         Effective interpersonal skills. ·         Materials management skills. ·         Negotiation skills. ·         Record keeping skills. ·         Customer relations ·         Computer skills. Terms of Employment This is a Two -Year Contract with attractive remuneration and benefits renewable at the option of the Authority   If you meet the above requirements, please log into and follow the steps to submit an online application. Applications should be received on or before March 10, 2017 Only shortlisted candidates will be contacted for interviews. “Capital Markets Authority is an Equal Opportunity Employer. Persons with disabilities are encouraged to apply”.      
  • Thu 23 Feb 2017

    Premiere Capital Markets Soundness Report - Volume I

    Premiere Capital Markets Soundness Report - Volume I
  • Fri 17 Feb 2017

    CS. Hellen Kwamboka Ombati

    CS. Hellen K. Ombati CS. H. K Ombati is a holder of a Masters of Business Administration (MBA) in Strategic Management from the Catholic University of Eastern Africa and a Bachelor of Laws (LLB) from the University of Nairobi. She is a Certified Public Secretary and a member of the Institute of Certified Secretaries of Kenya (ISPCK), CS. H .K .Ombati is an advocate of the High Court of Kenya and a member of the Law Society of Kenya as well as the Chartered Institute of Arbitrators - UK and the Kenya Institute of Supply Management. She also holds a Diploma in French from Alliance Française - Paris. She joined the Capital Markets Authority (CMA) in May 2016 as the Head Legal Affairs and Corporation Secretary. Prior to joining the CMA, she served as the Manager Legal Services & Board Coordination at the Kenya Revenue Authority. CS. H.K Ombati has been involved in conveyancing practice, preparation of contracts and legal Agreements, Commercial Law as well as company secretarial work. She has also participated in civil society where she was engaged in civil litigation and prosecution of criminal cases at FIDA Kenya. She has also worked as a State Counsel at the Attorney General’s Chambers. Currently, she is practicing Securities and financial services law as well as commercial law.
  • Fri 17 Feb 2017

    Press Release: CMA approves listing of first Exchange Traded Fund in Kenya

    CMA approves listing of first Exchange Traded Fund in Kenya Nairobi February 17, 2017…The Capital Markets Authority (CMA) has granted approval for the listing of the first Exchange Traded Fund (ETF) in Kenya, to be issued by NewGold Issuer (RF) Limited. NewGold Issuer (RF) Limited, a company incorporated in South Africa. NewGold Issuer (RF) Limited will issue and list 400,000 Gold Bullion Debentures as a secondary listing on the Nairobi Securities Exchange (NSE) main investment market segment. The value of NewGold ETF tracks the price of gold. The listing price of the ETF will be determined on the listing date based on the real time cash market values of the gold price and the real time price of the Kenya Shilling. ETFs are a type of listed open-ended index or unit instrument bought or sold on a securities exchange. The index or unit may be composed of ordinary stocks, bonds, commodities, futures or a combination of real assets with the objective of allowing for exposure to a portfolio of securities, assets or indices whose price movement is in tandem with the price movement of the constituent underlying securities or commodities. An ETF can be a domestic or offshore product. The Authority developed Policy Guidance Notes in September 2015 to operationalize the trading of ETFs in Kenya. The Capital Market Master Plan prioritizes regional and international investment as one of the areas of focus. ETFs provide an opportunity for investors to diversify their investment portfolios to access international products. “This is a critical milestone in positioning Kenya as a gateway for regional and international capital flows by developing creative products that promote investor confidence in regional products. This is a step toward Kenya becoming a choice investment destination”, said CMA Chief Executive Mr. Paul Muthaura. The Authority observed that the Supplemental Prospectus of NewGold Issuer (RF) Limited makes adequate disclosure of material information in accordance with the requirements of the Capital Markets Act and the Exchange Traded Funds Policy Guidance Note, 2015 to enable investors make an informed decision on the issue. NewGold Issuer (RF) Limited, a wholly-owned subsidiary of NewGold Owner Trust, was primarily listed on ETF sector of the Johannesburg Stock Exchange in 2004. Other secondary listings of the ETF have been on the Botswana Stock Exchange, Stock Exchange of Mauritius, Namibia Stock Exchange and Ghana Stock Exchange (2012). The NewGold Gold Bullion Debentures issued subsequent to the secondary listing on the NSE will rank equally with each other and with all other Gold Bullion Debentures already in issue, prior to the NSE listing. NewGold Issuer (RF) Limited uses proceeds from the Issue to acquire Gold Bullion. Gold Bullion held by NewGold are physical unwrought gold in the form of London Good Delivery Bars. ENDS BACKROUND INFORMATION ON THE CAPITAL MARKETS AUTHORITY The Capital Markets Authority (CMA) was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, please contact: Antony Mwangi, Head of Corporate Communications on
  • Thu 02 Feb 2017

    IFC and Capital Markets Authority Kenya Build Capacity for 200 Directors of Listed Companies and Issuers

    In Nairobi                                                                                                                            In NairobiNeha Sud                                                                                                                            Antony MwangiPhone: +254-20-293-7403                                                                                                     Phone: :+254-20-226-4204E-mail:                                                                                                           E-mail:   In Washington, D.C.Loty SalazarPhone:1-202-458-2559E-mail:   Nairobi, Kenya, February 2, 2017 — International Finance Corporation (IFC), a member of the World Bank Group, and Capital Markets Authority (CMA) have kicked off the second phase of the capacity building program for directors of listed companies and issuers focusing on the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 (Corporate Governance Code). The capacity building program seeks to raise awareness on the requirements of the Corporate Governance Code among listed companies and issuers in order to enhance its application beginning March 2017. The program will see 200 directors sensitized over a four-day period from 2 – 7 February 2017. “Since we entered into the agreement with IFC in November 2016, we have observed overwhelming interest from issuers on the Corporate Governance Code. The first Corporate Governance Code Master class held in November 2016 attracted 80 CEOs, CFOs and CSs from listed companies and we are glad to see strong levels of interest from board members for the current round,” CMA Chief Executive, Paul Muthaura noted. The Authority noted that each of the two sessions of the Corporate Governance Master Class will take place over two days. The Corporate Governance Master Class is structured to cover specific Corporate Governance Code related topics such as board effectiveness, rights of shareholders, ethics and social responsibility, risk management and internal control, and disclosure, in order to empower board members to improve their company’s Corporate Governance practices and strengthen the functioning of their boards and control environments. “These capacity building programs are expected to strengthen corporate governance among issuers in the capital markets and as a result enhance investor confidence. This strengthening of governance practices is fundamental for issuers to succeed in mobilizing resources from the capital markets locally and globally, as well as to facilitate development and the achievement of ambitious plans outlined in the Vision 2030 and Capital Market Master Plan”, said Mr. Muthaura. ‘’Companies that practice good corporate governance tend to carry lower risk and generate higher returns for shareholders. They also have demonstrated better performance, and can secure cheaper capital and lower regulatory costs”, said Oumar Seydi, IFC Director for East and South Africa. The IFC in conjunction with the CMA has subsequently developed a corporate governance reporting framework which includes guidelines for reporting and a reporting template. The reporting framework will aid listed companies, issuers and governance auditors to structure compliance statements to reduce regulatory burden and ensure that shareholders and stakeholders are able to rapidly understand an issuer’s degree of compliance. The reporting framework will also present data in a structured format that allows for cross-company comparison. The partnership has also developed an assessment framework for use by CMA to assess the quality of corporate governance among issuers of securities in Kenya. The Corporate Governance Code is on an “apply or explain” principle. This means that an issuer may in some circumstances explain non-application of the Corporate Governance Code principles, guidelines and recommendations in favor of an alternative measure, as long as the alternative delivers a better standard of corporate governance. Where non-application delivers a lower standard of corporate governance, issuers will be expected to explain to the Authority, shareholders and stakeholders the reasons for non-application or partial application, the time frame required to meet each application requirement, and the strategies the issuer will put in place to progress to full application. Each issuer will be required to post on its website, the completed reporting template and send the same to the Authority within four months of the close of each financial year. The Authority noted that there are mandatory corporate governance provisions which were extracted from the Corporate Governance Code which an issuer must comply with. The mandatory provisions are prescribed in the Capital Markets (Securities) (Public Offers, Listing &Disclosure) Regulations, 2002. The IFC and Authority further observed that a pool of 21 executives have been through a rigorous Training of Trainers program on the Corporate Governance Code carried out in November 2016. The trainers will be able to support issuers through further in-depth and customized capacity building as issuers may require. CMA began implementing corporate governance reforms in 2012, which culminated in the enactment of the new Corporate Governance Code in March 2016. The Corporate Governance Code provided issuers with a transition period on one year, within which they should commence its application. IFC and CMA have also developed a Stewardship Code for Institutional Investors, which will soon be enacted. IFC has contributed to the adoption of 95 corporate governance codes, laws, and regulations in more than 30 countries worldwide. IFC’s Corporate Governance Program in East Africa is funded by the State Secretariat for Economic Affairs of Switzerland. About Capital Markets AuthorityThe CMA was set up in 1989 as a statutory agency under the Capital Markets Act Cap 485A. It is charged with the prime responsibility of both regulating and developing an orderly, fair and efficient capital markets in Kenya with the view to promoting market integrity and investor confidence. The regulatory functions of the Authority as provided by the Act and the regulations include; Licensing and supervising all the capital market intermediaries; Ensuring compliance with the legal and regulatory framework by all market participants; Regulating public offers of securities, such as equities and bonds & the issuance of other capital market products such as collective investment schemes; Promoting market development through research on new products and services; Reviewing the legal framework to respond to market dynamics; Promoting investor education and public awareness; and Protecting investors’ interest. For more information, visit For more information contact: Antony Mwangi, Phone: +254-20-226-4204, Email: Stay Connected About IFC IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with 2,000 businesses worldwide, we use our six decades of experience to create opportunity where it’s needed most. In FY16, our long-term investments in developing countries rose to nearly $19 billion, leveraging our capital, expertise and influence to help the private sector end extreme poverty and boost shared prosperity. For more information, visit Stay;,\ifc_org About SECOSECO is Switzerland’s competence center for all core issues relating to economic policy. SECO’s economic development cooperation strives to achieve sustainable growth. Such growth is sustainable if it creates jobs, helps to increase productivity, to reduce poverty, inequalities and global risks. For more information, visit


Capital Market Concepts Explained


A short-term speculator who would sell shares on account in the hope that they would fall in value so that they could be bought at the end of the account more cheaply leaving the investor with a profit at the end of settlement day.

Bid-Ask Spread

This is the difference between the price that the market-maker/broker is willing to pay for a share or a bond and the price at which the marketmaker/ broker is willing to sell the same share or bond.

Bid Price

The price at which a market-maker/broker is willing to purchase a specified quantity of a particular share or bond.

Blue Chip Company (Share)

This is a well-established company with considerable assets whose share investors regard as low risk investment.


This is a financial security issued by a company or financial institution or by the government (as investment to individuals, commercial banks and other institutional investors) as a means of borrowing long-term funds. Bonds are normally issued for a fixed number of periods and are repayable on maturity. The practice is to issue bonds in units of a fixed nominal face value and bear a fixed/floating nominal rate of interest. Issued bonds can be bought and sold on the stock market, e.g. EADB bonds.

Bonus Issue

Is also known as script issues or capitalization issue. These are additional hares issued to existing shareholders without further payment on their art. It involves capitalization of reserves i.e. turning the reserves into fully paid new share capital. The capitalization of reserves is attractive in the case of non-distributable reserves such as share premium or a evaluation reserve arising on the upward revaluation of assets. n efficient markets, the effect of a bonus issue on a share price is egligible because the total market value of the company remains nchanged. It remains unchanged if the fall in the market price per share compensate for the increase in the number of shares resulting from a CAPITAL MARKET CONCEPTS EXPLAINED bonus issue. At times the fall in share price will be less than expected. first, because this happens if the bonus issue increases the marketability of a share; secondly if the bonus issue is accompanied by the news tha thave a favorable impact on the share price even in the absence of a bonus issue; third if the company announces that the same level of

dividend will be maintained after the bonus issue; and fourth is that capitalization of revenue reserves is normally followed by increase in the level of fixed capital thus lowering the financial risk of the company.

Book Value of Equity

The sum of cumulative retained earnings and other balance sheet entries lassified under shareholders funds (ordinary) such as ordinary shares and share an agent or middlemen who facilitates the buying and selling of shares and bonds for investors.


This means a short-term speculator in the market. A bull buys particular shares in the hope that their price will rise and so they could be sold before the end of the period’s account so as to earn a profit. A stale bull buys shares, but the rise in price he hoped for fail to materialize. He may then sell off his position at a loss or carry his position into the next accounting period hoping that the rise in value will have occurred by the end of the period.

Call Market

A share or/and bond market in which trading is allowed only at certain specified times. At those times, investors interested in trading this particular share and/or bonds are physically brought together and a

market-clearing price is established.

Capital Markets Authority (CMA)

A government agency established by the Capital Markets Authority Act of 1989 that facilitates, regulates and oversees the activities of the capital markets. The objectives of CMA are:

The development of all aspects of the capital markets with particular emphasis on the removal of impediments to, and the creation of incentives for longer term investments in productive activities;

To facilitate the existence of a nationwide system of stock market and brokerage services so as to enable wider participation of the general public in stock market;

To create, maintain and regulate a market in which securities can be issued and traded in an orderly, fair, and efficient manner, through the implementation of a system in which the market participants regulate themselves to the maximum practicable extent;

To protect investor interests;

To operate a compensation fund to protect investors from financial loss arising from the failure of a licensed broker or dealer to meet his contractual obligations

To develop a framework to facilitate the use of electronic commerce for the development of capital markets in Kenya

Capital Gain (Or Loss)

This is the difference between the current market value of an asset and the original cost of the asset.

Capital Markets

These are financial markets in which financial assets with a term-tomaturityof typically more than one year are traded.

Trading Account

This is an account maintained by a investors with his/her brokerage firm in which deposits (cash and proceeds from security sales) must fully cover withdrawals (cash and the cost of security purchases).


This is a technical analyst who primarily relies on share prices and volume charts when evaluating shares and/or bonds.

Closing Price

The price at which the last trade of the day took place in a particular security (share/bonds).

Convertible Bond

A bond which may at the holder’s option be exchanged for other securities, often the security is ordinary shares.


This is the fee an investor pays to a stock broker for services rendered in the trading of securities.

Coupon Payment

Periodic payments of interest on bonds

Date of Record

The date that is established by a company's board of directors, on which the shareholders record are determined for the purpose of allocating bonuses or dividends.


This is a person who facilitates the trading of financial assets by maintaining an inventory in (or stock of) particular shares or bonds. The dealer will buy from and sell for this inventory, profiting from the

difference in the prices at which he or she is willing and able to buy.


This is a means of financing companies through fixed interest loans secured against the company asset. A debenture is a borrowing instruments used by companies. Some debentures are irredeemable

(perpetual) but most of them mature and are redeemed. As a debenture holder you are paid fixed rate of interest, which must be paid before a dividend is paid to the shareholders. The advantage of debenture to a company is that they carry lower interest rates than e.g. bank overdrafts and are usually repayable long time into the future. The interest on debentures is a loss which is tax deductible.


The process of removing a security’s eligibility for trading on an organized securities exchange

Depository (CDS)

This is a centralized depository for securities registered in the name of member firms. Member’s security certificates are immobilized and computerized records of ownership maintained. This permits electronic transfer of the securities from one member to another when trades are conducted between the member clients.

Discretionary Order

Under a discretionary order to buy or sell shares/bonds, the broker is permitted to specifications for the clients order.


The process of adding securities to a port in order to reduce the portfolio's total risk


A payment made by a company to its shareholders for providing share capital. Dividends are paid out of distributable profits and are paid in proportion to the number of shares held. The directors have a right to recommend payment of dividends or not. The directors may pay an interim dividend before the year then recommend a final rate of dividend per share for approval by shareholders at the annual general meeting.

Dividend Cover

This is a measure of the extent to which after tax earnings, cover dividends paid. It expresses profit as a multiple of dividends paid.

Dividend Yield

This is dividend paid per share expressed as a percentage of current market price per share. This is comparable to quoted yields on or investments such as Government stocks. As the level of ordinary dividends can be varied by the company the dividend yield is normally heavily influenced by market's expectation of future growth in dividend itself and in the share price. Some investors think that a high dividend yield is a signal that the shares are a good buy. This is not always true. Companies with high dividend yields tend to have a low share price because the market has considerable doubts about the future of the company and its ability to maintain, let alone increase the dividend level in future. High dividend yield is in most cases accompanied by high risk.

Earnings Yield

This is earnings per share as a percentage of current market prices per share. Earnings yield is useful in estimating share prices.

Net Asset Value per Share (NAV) or Book Value per Share

This is the net tangible assets attributable to the ordinary shareholders divided by the number of shares in issue. NAV is of little use in investment decision as in most cases it will usually be well below the value calculated using earnings yield. However NAV is fairly descriptive in the case of property companies which tend to have low earnings compared with their asset value.

Equity Valuation Ratio (EVR)

This is market share price divided by net asset per share. Equity Valuation Ratio of less than one suggests that the current market share price is below the net assets. Companies with low EVR are normally subject of take over by predators.

Ex Dividend Date

The date on which ownership of a share is determined for purposes of paying dividends. Investors purchasing shares before the ex-dividend date receive the dividend in question. Investors purchasing shares on or after ex-dividend date are not entitled to the dividend.

Fail To Deliver

This is a situation in which a sellers broker is, unable to deliver the traded security to the buyers broker on or before the required settlement date.

Financial Analysts

An individual who analyzes financial assets in order to determine the investment characteristics of such assets and to identify mis-pricing among those assets

Financial Security

This is a financial security issued by a company as a means of raising long-term capital. Originally, purchasers of shares pay money into the company’s bank account and in return receive a share certificate signifying their ownership of the shares and have their ownership recorded in the company's share register.

Fill or Kill Order

A trading order by an investor to the broker which is cancelled if the broker is unable to execute it immediately

Flat Yield Or Current Yield

This is used to describe a yield calculation which does not take account of the redemption value of a bond.

Floating Rate

A rate of interest of a financial asset that may vary over the life of the asset, depending on changes in a specified indicator of current market interest rates. For example the Central Bank of Kenya as a fiscal agent of Republic of Kenya issues bonds at an interest rate determined by adding a 0.25% premium above the 12 weeks moving average rate of the 91 days bill as at the interest payment week.

Floor Broker

This is a member of organized security (stock) exchange who assists commission brokers when there are two many orders flowing into the market for commission brokers to handle. There are no floor brokers at NSE.

Fundamental Analysis

This is a form of security (shares/bonds) analysis, which seeks to determine the intrinsic value of securities based on underlying economic factors. The intrinsic values are then compared to current market prices to estimate current levels of mis-pricing.

Index Fund

This is a passively managed investment in a diversified portfolio of financial assets designed to mimic the investment performance of a specified market index. An example is a portfolio consisting of shares

constituting the NSE 20 share index.


Shareholders, directors and managers of a company who own a significant proportion of a company’s shares. It also means anyone who has access to information that is both materially related to the value of a company's securities and that information is unavailable to the general public.

Insider Dealing

It is illegal to deal in shares on the basis of privileged information which has been obtained by virtue of working for a company or for one of its professional advisers. It is equally an offense to receive price sensitive information with a view to making a gain by use of that knowledge.


The sacrifice of certain present value for future value.

Leading Indicators

These are economic variables which have been found to signal future changes in the economy.

Limit Price

The price specified when a limit order is placed with a broker. It involves defining the maximum purchase price or minimum selling price at which the order is to be executed.

Listed Security

A security that can be traded on a stock exchange

Margin Account

This is an account maintained by an investor with a brokerage firm in which shares or bonds may be purchased by borrowing a portion of the purchase price from the brokerage firm or may be sold short by

borrowing the shares or bonds from the broker.

Margin Call

This is a demand upon an investor by a brokerage firm to increase the equity in the investors margin account. The call is made when the investor's actual margin falls below the maintenance margin requirement.

Margin Purchase

The purchase of shares and bonds financed by borrowing a portion of the purchase price from the brokerage firm

Marking To The Market

The daily process of adjusting the equity in an investor's account to reflect the daily changes, in the market value of the investors accounts assets and liabilities.

Market Capitalization

This is the total market value of a security (share or bond). It is calculated by multiplying the market price per unit of the security with the total number of outstanding units of security.

Market Index

This is a collection of shares and at times bonds, whose prices are averaged to reflect the investment performance of a particular market for financial assets. E.g. NSE 20 share index.

Market Risk

The part of shares total risk, which is related to, moves in the market portfolio. This kind of risk cannot be diversified away.

Market Portfolio

This is a portfolio consisting of investment in all securities or in securities representative of the market. The proportion invested in each security equals the percentage of the total market capitalization represented by the security.

Odd Lot

An amount of stock generally from 1 to 99 shares


Open Order

This is a trading order, which remains in effect until it is either filled or cancelled by the investor.

Ordinary Shares (Or Equity)

This is a financial instrument issued to those individuals and institutions who provide long term finance for companies. Ordinary shareholders are entitled to any net profits made by their company after all expenses have been paid. They receive their share of profits in the company in the form of dividends. In the event of the company being wound up they are entitled to any remaining assets of the

business after all debts and claims of preference shareholders have been met in full. Ordinary shareholders, have in most cases, voting right at their company's Annual General Meeting (AGM). The votes are based on the number of shares held.

Over Margined Account

This is a margin account in which the actual margin has risen above the initial margin requirement.

Over Valued Share Or Bond

This is a share or bond whose expected return is less than its normal (equilibrium) expected return.

Pay Order

This is an order by investors to a broker to buy or sell shares. The broker will attempt to fill such an order only during the day in which it was entered.

Perfect Markets

They are securities markets in which no impediments to investing exist. The cited impediments are taxes, transactions costs, and costly information.

Portfolio Manager

A manager who uses the information provided by financial analysts to construct a portfolio of financial assets.

Portfolio Construction

Means the same thing as security selection and is an investment process that involves identifying the proportion of funds to invest in each of the assets.

Preference Shares

This is a financial security issued to those individuals and institutions who provide long term finance for companies. Preference shareholders are entitled to a fixed dividend from a company’s profit, before ordinary shareholders receive anything, and have first claim on any remaining assets of the business after all debts have been discharged. Preference shares can be participating, cumulative and redeemable. It is not a must that a company pays dividends on preference shares.

Price to Earnings Ratio

The market rice per share divided by earnings per share. It’s measured in relative terms, how expensive or cheap a particular share is.

Price Relative

The price of a share in one period divided by the price of the same share in a previous period.

Private Placement

This is the direct sale of newly issued shares direct to one or a small number of large institutional investors.


This is the official selling circular that must be given to potential purchasers (subscribers) of new shares or bonds and is registered with both NSE and CMA.


The signing by a shareholder of a power of attorney, thereby authorizing a designated party to cast all the shareholders votes on any matter brought up at the company’s AGM.

Rate of Return on a Share

This is the percentage change in the value of an investment in a share over a specified time period. The total return includes dividends.

Redemption yield

This takes into account not only the annual interest receivable but also any capital profit/ loss on redemption of the security.

Reverse Yield Gap

This arises whenever the yield on gilt exceeds the yield on shares as a result of high inflation and high interest rate. The normal situation is that the yields on shares should be higher than the yield on bonds because the shareholders need to be compensated for additional risk that they bear.

Right Issue

This is when a company sets out to raise additional funds from existing shareholders. It is the most popular method of raising new equity capital for cash. It is an offer to existing shareholders to subscribe cash for new shares in proportions to their existing holdings. If a company is to issue

additional shares, the existing shareholders have a right to take up the shares before any of the shares are offered to non-shareholders. Right issues are popular because they are offered to existing shareholders at a price slightly below the current market price. This mean that the existing shareholders can buy the share cheap and sell at a higher current market price; and that their relative voting rights remain unchanged despite additional share issue. The issuing company benefits in terms of

relatively low issue costs because in most cases no prospectus is required, the administration is simpler and underwriting costs can be relatively low. If the shareholder is not interested in taking up the new

shares, he may sell the right.


The uncertainty associated with the end-of period value of an investment in an asset or portfolio of assets.

Risk Averse Investor

An investor who prefers an investment with less risk over one with more risk on investments that offer same (identical) return.

Risk Premium

The price or compensation for assuming additional risk. Investors tend to avoid risk unless they are rewarded for assuming additional risk.

Risk-Neutral Investor

This is a kind of investor who has no preference between investments with varying levels of risk assuming that the investment offers the same expected return.

Risk Seeking Investor

Is an investor who prefers an investment with more risk, assuming that both investments offer the same expected return.

Risk Tolerance

This is the trade off between risk and expected return as demanded by a particular investor,

Risk less Asset

An asset whose return over a given holding period is certain and known at the beginning of the holding.

Risk Free Borrowing

This involve of borrowing funds that are to be repaid with a known rate of interest.

Risk Free Lending (Investing)

This involves investing in a risk free asset.

Round Lot

This is the sale or buying of an amount of shares generally equal to 100 shares or a multiple of 100 shares.


A method of governmental regulation where the rules and the standards of conducts in stock exchanges and related markets are determined by firms that operate in the same markets; but this is subject to the supervision of various government agencies. CMA encourages market players to make their own rules, but ensure firms follow their rules.


This is a financial instrument issued by companies and the government as a means of raising capital and borrowing money. The most commonly used financial securities are Shares, Stocks, Debentures, Treasury Bills and Bonds. The security can later be sold and brought on either money market (if for short term) and Stock Exchange (market).


These are individuals and institutions that have contributed funds to finance a company in return for shares in that company. They can be ordinary or preference shareholders.

Share Certificate

This is a document which is issued to a shareholder in a company, which serves as a proof of ownership of shares in a company.

Share Capital

The amount of money employed in a company that has been subscribed by the shareholders of the company in the form of ordinary shares (equity) and preference shares. Share capital is a permanent source of finance for a company as long as the company is in existence.

Share Split

A share spit is where the total nominal value of the share capital remains unchanged but the existing shares are cancelled and replaced by a larger number of new shares with a smaller nominal value. For example a company which currently has 2,000 shares of Ksh. 10 each i.e. total nominal value of Kshs.20,000 can prefer a lower nominal value of Kshs. 20 per share thus ending up with 1,000 shares instead of 2,000. This involves reduction in the face (nominal) value of the company's shares and simultaneous exchange of a multiple number of new shares for each existing share.

Share Consolidation

This is the reverse of share split. The total nominal capital remains the same, the number of shares in issue decrease and the nominal value per share increases from say Kshs. 5 to Kshs. 10 per share.

Share Option

This is a contractual right to buy a share in a company at a predetermined price within a predetermined period. An example of a share option is a right issue. A share option can be granted by a company to its workers as a means of improving their motivation and loyalty to the company.

Special Offering

This is a transaction involving a large block of shares on an organized stock exchange whereby a number of brokers attempt to execute the order by soliciting offsetting order from their customers.


An investor in securities whose primary objective is to make profit from purchases and sales of shares and bonds.

Spot Price

The purchase price of an asset in the spot market.

Spot Rate

The annual yield-to-maturity on a pure-discount security.


This is a financial security issued by a company or the government as a means of raising long-term capital. In USA stockholders are the equivalent of shareholders and are the owners of the company. In UK and a number of commonwealth countries, stock is a form repayable, fixed-interest debt and the stockholders are therefore creditors not owners of the company.

Stop Limit Order

This is a trading order that specifies both a stop price and a limit price and if the share price reaches or passes the stop price then a limit order is created at the limit price.

Stop Order or Stop Loss Order

This is a trading order that specifies a stop price, i.e. if the share or bond price subject is the transaction reaches or passes the stop price, then a market order is created.

Subscription Price

This is a price at which holders of rights are permitted to purchase shares in a right issue.

Supply To Sell Schedule This is a detailed list of the quantities of a security that an investor is

prepared to sell at alternative prices.

Take Over

This is a decision by an individual or firm to acquire controlling interest in a company. Related to takeover is a target firm, which is a firm that is the subject of a takeover.


Trading Halt

This is a temporary suspension in the trading of a security on an organized stock exchange.

Street Name

This is an arrangement between an investor and a brokerage firm where the investor maintains an account in which the investor's securities (investment in shares and bonds) are registered in the name of brokerage firm.

Transfer Agent

This is a designated agent of a company usually a bank, which administers the transfer of cornpany's shares between old and new shareholders.

Treasury Bills

This is a redeemable financial security, normally with a life of three months, and is issued by the Central Bank on the behalf of the government. They are issued to raise finance for the government to cover budget deficits and as a means of controlling the money supply and level of interest rates. Government departments with temporary cash surpluses can purchase the Treasury Bills. The vast majority of Treasury Bills are sold at periodic tender auctions to discount houses and other financial institutions. Treasury bills bear a nominal face value which is repaid in full on redemption, but the price paid at the time of issue to the issuer depends on the outcome of a competitive tender with different bidders bidding against one another. The Treasury Bills can then be discounted (sold) in the discount market to other buyers, who in most cases are commercial banks. Commercial Banks hold Treasury Bills as part of their liquidity base to support their lending decisions.


This is an organization, in most cases, a bank which serves as the representative of debt holders (creditors). The trustee acts to protect the interest of bondholders by facilitating communication between them and issuing organization.

Unit Investment Trust

This is an unmanaged investment company with a finite life that raises an initial sum of capital from investors and then uses the proceeds to purchase a fixed portfolio of securities.


This is a trade in a share made at a price higher than the price of the previous trade in that same share.


Value Weighted Market Index

Is market index in which the contribution of a security to the value of index is a function of the securities market capitalization.

Voting Bond

Is a bond that gives its holder a voice in management of the issuer.

Wash Sale

Is the sale and subsequent purchase of almost identical security solely for the purpose of minimizing taxation.


This is return on a financial security expressed in money terms then related to the current market price of that security. Yield can refer the interest rate payable on the market price a bond (interest yield) or

dividend rate pay on the market price of a share dividend yield or earnings per share related to the market primary of the share (earnings yield).-

Yield Gap

This is the difference between the yield on established undated or long dated gilt-edged bonds and the average yield on shares. For ample if the average yield on shares is 25% the yield on long dated gilt-edged bond is 18% then the yield gap is 7%.

Yield Curve

This is a curve that shows the relationship between similar assets with different terms to maturity. A normal yield curve would be upward sloping.

Zero Plus Tick

This is a trade in a security made at a price equal to that of the previous trade in that security but higher than that of the last trade in the security but at a different price.

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