Equity investors will pay CDSC 1.8 billion shillings a year for maintenance
- Investors in the Nairobi Stock Exchange have been hit by a new monthly charge of 100 shillings on stock exchange accounts which could see the Central Depository and Settlement Corporation (CDSC) raise nearly 1.8 billion shillings a year.
- The CDSC, which facilitates the holding of shares in electronic accounts opened by shareholders and manages the process of transferring shares traded on the exchange, declined to give the current number of trading accounts.
- The last published annual report for 2020 shows that CDSC had around 1.5 million accounts, of which 1.1 million were actively trading.
Investors in the Nairobi Stock Exchange have been hit by a new monthly charge of 100 shillings on stock exchange accounts which could see the Central Depository and Settlement Corporation (CDSC) raise nearly 1.8 billion shillings a year.
The new charge, which will be introduced in July, will increase the cost of investing on the Nairobi Stock Exchange (NSE) where transactions can attract fees of up to 2% of the value of the transaction.
The CDSC, which facilitates the holding of shares in electronic accounts opened by shareholders and manages the process of transferring shares traded on the exchange, declined to give the current number of trading accounts. The last published annual report for 2020 shows that CDSC had around 1.5 million accounts, of which 1.1 million were actively trading.
The charge will earn the CDSC six times the revenue collected that year of 308 million shillings that the platform earned through billing transactions, deposits, registry fees and bond levies.
The new charge on stock accounts comes at a time when the platform has suffered from a drop in revenue due to reduced trading at the NSE due to a market meltdown and increased trading. inactive accounts.
“Dear investor, effective July 15, 2022, CDSC will introduce a CDS account maintenance fee of Sh100 per month payable annually,” the CDSC said in a text message.
CDSC’s major revenue comes from the transaction tax upon completion of stock and bond transactions in the central depository system where it earned 238 million shillings in 2020.
It charges each investor 0.08% of each transaction plus 0.01% for the CDSC guarantee fund. The filing fee earned the platform 16.5 million shillings, the registrar fee 4.7 million shillings, the bond tax 27.6 million shillings and 20 million shillings. others.
The new charge will help CDSC earn money from active and inactive accounts where the platform was not collecting any revenue from those who do not trade. Dormant accounts, mostly held by individuals, stood at 385,411.
The upcoming charge will boost profits and dividends for its major shareholders including Capital Markets Challenge Fund, Nairobi Securities Exchange, AKS Nominees, Capital Markets Investor Compensation Fund and Uganda Securities Exchange.
The settlement platform pumped resources to expand the Kenyan market’s ability to trade more than one position in a day, perform securities lending and borrowing, and improve efficiency.
CDSC’s new platform can now execute multiple trades in a day, potentially earning retail investors profits on small price moves while opening up a new revenue stream for the securities platform.
Day trading was supposed to return 0.8% to the CDSC on each trade, but the market did not attract much activity even after the Capital Markets Authority (CMA) set a 5% discount on the second stage of the transaction, which will be charged at 0.114. percent compared to normal trades which are charged at 0.12 percent.
The decision to start collecting the new fee, however, comes at a time when the market has fallen to a 20-month low due to reduced participation by foreign investors and capital outflows due to the Russian-Ukrainian war which intensified outflows from emerging and frontier markets. considered more risky.
Major global economies, including the United States and Europe, are also raising interest rates to fight inflation, reducing the attractiveness of investing in frontier markets.
NSE investors lost 294 billion shillings in a month following a sell-off by foreigners that sent the stock market down to 2.176 billion shillings from 2.471 billion on April 13.
The value of shares traded fell to 33.76 billion shillings in the first four months of the year, from 41.61 billion shillings a year earlier. Equity turnover fell 18.9% due to the continued decline in foreign investor participation and appetite for stocks on the stock exchange.