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Capital markets stakeholders’ host consultative meeting on framework for introduction of Exchange Traded Funds


Press Release

Capital markets stakeholders’ host consultative meeting on framework for introduction of Exchange Traded Funds

Nairobi April 23, 2015…In a drive to diversify products available in the Kenyan market, the Capital Markets Authority (CMA), Nairobi Securities Exchange, and the Central Depository and Settlement Corporation together with other key stakeholders today unveiled the roadmap to pave way for the introduction of Exchange Traded Funds (ETFs). This follows the approval by the CMA Board of a Guidance Note to facilitate the introduction of ETFs.

The Guidance Note is a first in the Kenyan markets under a principles-based approval approach under Section 12A Capital Markets Act. This new provision came into force in December 2013 following the enactment of the Capital Markets (Amendment) Act 2013.

The adoption of a principles based approval framework by the Authority brings into operation recommendations of the Capital Market Master Plan with a view to enhancing CMA’s role to fulfill its twin objectives of market development and regulation.

The CMA Acting Chief Executive, Mr. Paul Muthaura, highlighted that the powers under section 12A are designed to empower the Authority to fast-track the roll-out of new products and services in Kenya’s capital markets to ensure there is a timely regulatory response to changing market dynamics pending the enactment of a comprehensive regulatory frameworks.

“A principle-based approach is a regulatory approach where the law does not set out specific/prescriptive rules on what a market player can or cannot do but rather sets out broad but well-defined principles that market players are expected to follow. This is more flexible and promotes innovation’’, noted Mr. Muthaura.

Mr. Muthaura indicated that it is in an effort to increase the scope of available capital market products in Kenya’s capital markets that CMA, in consultation with key stakeholders, developed the Guidance Note on ETFs.

As a first step, proposed amendments to the trading and listing rules that have taken account of the Guidance Note on ETFS, have already been submitted to the Authority for review and approval.

‘’The consultative forum presents an opportunity for stakeholders such as potential promoters of ETFs to understand and appreciate the process and the prerequisites for initial trading of ETFs trading in Kenya, pending the development of a comprehensive regulatory framework to guide the operations of this new market segment’’, he added.



Exchange Traded Funds (ETFs)

An ETF is an investment unit traded like other securities on securities exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds and typically trades close to its net asset value (NAV) over the course of the trading day. Most ETFs track an index, a commodity or a futures contract. ETFs are part of a bigger group of financial instruments known as Exchange Traded Products (ETPs) that is growing in popularity as a method of investing, providing the opportunity for investors to diversify their portfolios while maintaining flexibility in trading that is similar to stocks. ETFs enable investors to gain a broader exposure in stock markets in different countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investment.

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 contact: Antony Mwangi, Head of Corporate Communications, Capital Markets Authority on Cell: 0722825227 and Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

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