Clearing and settlement agencies in the Kenya Capital Markets

A clearing and settlement agency in Kenya is a financial institution that facilitates the settlement of securities trades. It plays a critical role in the capital markets by providing a platform for the exchange of securities, including stocks, bonds, and other financial instruments.

In Kenya, there are several clearing agencies that operate within the country, each offering different services to market participants.

List of Clearing and settlement agencies in Kenya

Central Depository & Settlement Corporation (CDSC)

One of the main clearing agencies in Kenya is the Central Depository & Settlement Corporation (CDSC). It was established in 1996 and is the first and only central securities depository in the country. It provides electronic depository and settlement services for the equities and fixed-income markets.

The CDSC operates a central database of securities, enabling efficient and secure settlement of trades. It also provides services such as corporate action processing, securities lending and borrowing, and the issuance of new securities.

Nairobi Securities Exchange (NSE)

Another clearing agency in Kenya is the Nairobi Securities Exchange (NSE). The NSE is the principal stock exchange in the country and is responsible for the listing, trading, and clearing of securities.

It offers a range of services to market participants, including trade matching, clearing, and settlement. The NSE also provides a platform for the trading of debt securities, including government bonds and corporate bonds.

Financial Markets Conduct Authority

The Financial Markets Conduct Authority abbreviated as (FMCA), is a clearing and settlement agency in Kenya that is responsible for regulating and supervising the financial markets in the country.

Capital Markets Authority

The CMA (which stands for Capital Markets Authority), is also a clearing and settlement service in Kenya, responsible for the regulation and supervision of the capital markets.

Kenya Bankers Association

The Kenya Bankers Association (KBA) is a clearing agency that facilitates the clearing and settlement of interbank transactions, including checks, drafts, and electronic payment instruments. It also provides services such as the management of the Automated Clearing House (ACH), which is a platform for the electronic clearing and settlement of interbank transactions.

Kenya Revenue Authority

The Kenya Revenue Authority (KRA) is a government agency responsible for the collection of taxes and duties in the country. It operates the Electronic Fiscal Device (EFD) system; which is a platform for the electronic clearing and settlement of Value Added Tax (VAT) and other taxes.

Kenya Electronic Payment and Settlement System

Just like KBA, the Kenya Electronic Payment and Settlement System (KEPSS) is a clearing and settlement agency that also facilitates the clearing and settlement of interbank transactions, including checks, drafts, and electronic payment instruments.

It operates the Real Time Gross Settlement (RTGS) system, which is a platform for the electronic transfer of funds between banks in real time.

M-Pesa Mobile banking

The M-Pesa is a popular mobile money platform operated by Safaricom; a telecommunications company in Kenya. It enables users to send and receive money, pay bills, and access other financial services using their mobile phones. M-Pesa is a clearing agency in Kenya as it facilitates the clearing and settlement of transactions between users of the platform.

FAQs

A clearing agency in Kenya plays a critical role in the financial markets by providing a platform for the settlement of securities trades and enabling the efficient exchange of securities. It acts as an intermediary between buyers and sellers of securities, ensuring that the trade is completed and the necessary funds and securities are transferred between the parties.

A clearing agency typically operates a central database of securities, which is used to track the ownership of securities and facilitate the settlement of trades. When a trade is executed, the clearing agency verifies that the parties have the necessary funds or securities to complete the trade, and then transfers the funds or securities between the parties.

While clearing agencies do provide a secure and efficient platform for the settlement of securities trades, there are still some risks involved. For example, there is a risk of fraud or errors in the trade settlement process, which could lead to losses for the parties involved. Clearing agencies also rely on external systems and infrastructure, which could be vulnerable to cyberattacks or other disruptions.

Some of the clearing agencies operating in Kenya include:

The Central Depository & Settlement Corporation (CDSC),
The Nairobi Securities Exchange (NSE),
The Financial Markets Conduct Authority (FMCA),
The Capital Markets Authority (CMA),
The Kenya Bankers Association (KBA),
The Kenya Revenue Authority (KRA),
The Kenya Electronic Payment and Settlement System (KEPSS),
M-Pesa mobile banking

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Clearing and settlement agencies in the Kenya Capital Markets

List of Clearing and settlement agencies in Kenya