Day trading goes live at the Nairobi Securities Exchange

After two years of setting up a system that separates trading and post-trading activities, day trading finally went live at the Nairobi Securities Exchange. Kevin Ngige, Senior Equities Analyst at Genghis Capital, discussed the implications of this new development in an interview with CNBC Africa. The move towards day trading is seen as a step in the right direction and is part of the Nairobi Securities Exchange's strategic roadmap. This initiative follows the introduction of derivatives and other key changes to the trading system, all aimed at enhancing market activity. According to Ngige, the reintroduction of day trading will allow investors to trade securities multiple times within a single trading session, potentially boosting market liquidity. The recent surge in the NSE market cap, largely fueled by local investor interest in alternative investments during the COVID-19 pandemic, underscores the potential impact of real-time trading. However, there are ongoing discussions regarding the effectiveness of the incentives offered by the NSE to investors participating in day trading. Some traders argue that the reduction in trading fees, from 0.22% to 0.24%, may not provide sufficient motivation for increased trading activity. The concerns stem from the fact that additional charges such as NSE fees, CMA levies, and CDSC fees could offset the perceived benefits of the fee cut. Ngige emphasized the need for further fee reductions to incentivize traders and ensure the sustainability of day trading. The implementation of day trading at the NSE faced delays primarily due to the impact of the COVID-19 pandemic. The need to adapt to remote working arrangements and system changes contributed to the extended timeline for the rollout of day trading. Despite the challenges posed by the pandemic, the NSE successfully transitioned to a digitized platform that enables trading from any location. While previous initiatives such as the derivatives market failed to gain traction, the introduction of day trading holds promise for revitalizing market activity. Ngige highlighted the potential benefits of day trading for various market participants. Brokers and traders managing their portfolios stand to benefit from the ability to execute swift buy and sell orders within a single trading session. The shortened settlement cycle under day trading also appeals to institutional investors and foreigners holding stocks at different levels. Retail investors may experience minimal changes, with the main advantage being quicker entry and exit from positions. Overall, the launch of day trading at the Nairobi Securities Exchange is poised to enhance market efficiency and attract a diverse range of participants. While challenges persist in aligning incentives and addressing fee structures, the introduction of real-time trading marks a significant milestone in the evolution of the NSE.