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CDSC History

Last modified on Friday, 20 January 2017 11:28


In 1995, the idea for a Central Depository was mooted and a study commissioned to look into its viability. A Draft bill was submitted to Parliament in 1997 and three years later the Central Depositories Act, 2000 was passed. CDSC was incorporated with the signing of a shareholders’ agreement. A search for a technology solution begun, culminating in the tender award to Millennium Information Technology (MIT) of Sri Lanka for the provision of a Central Depository System in 2002. In November 2004, CDS operations commenced. CDS account opening begun in earnest, and Immobilization (a process of converting shares from physical certificates to electronic form and depositing into CDS accounts) and Delivery verses Payment (DVP) Settlement begun in tranches. On 28th February 2005, full DVP settlement for all listed companies at the NSE was achieved. Market education training took place in 2005. The KenGen Initial Public Offer in 2006 was the first major operation for CDSC. This saw a huge increase in the number of CDS accounts opened. CDSC also played a fundamental role in the listing of Safaricom, the largest IPO in the East and Central Africa region, where the number of CDS accounts increased from 0.8 to 1.7 million. CDSC lived up to its mission of realizing efficiency by settling trades in 4 days and sought ways of further reducing this period. Having set the platform for the implementation of the Automated Trading System (ATS) by the NSE in 2006, CDSC has catapulted the Kenyan Capital Markets into the global arena with a commitment to achieving transactional trust, integrity and dynamism in the market.


The process of Dematerialization commenced in 2012 and reached its conclusion on 1st November, 2013, when shares of all firms listed at the Nairobi Securities Exchange (NSE) were irreversibly converted into electronic form. The dematerialization of corporate bonds in November 2014 was the culmination of the efforts towards a completely paperless securities market. Share certificates are therefore, no longer recognized as prima facie evidence of ownership of shares; since evidence of ownership is now in the electronic holdings maintained in the Central Depository System (CDS) operated by CDSC. With the implementation of Dematerialization, risks involved with physical certificates have been eliminated and the time required to clear each transaction reduced tremendously. This process has significantly raised the profile of Kenya’s Capital Market in adherence to international best practice. Consequently, the enhanced efficiency arising from dematerialization is expected to encourage more investors to flock to the Securities Exchange. The Dematerialization process has brought several benefits including: - Elimination of loss of certificates since these are now stored in an electronic form; - Easier and faster transfer or sale of shares; - Non-mutilated share certificates since these are now kept in electronic form in respective investor CDS accounts; and - Minimized cost of issuing new shares. In October 2014 CDSC concluded the dematerialization of corporate bonds, bringing to a close the era of the use of paper certificates within the Kenyan Capital markets. The achievement of an entirely paperless securities market has enhanced CDSC’s capacity to provide more efficient services at a cheaper cost as well as protect assets under its custody from losses resulting from misuse, fraud or insufficient record keeping. It has also realized a positive impact on market liquidity, paving the way for products such as short selling and securities lending and borrowing.

SMS Service

CDSC embarked on a series of joint investor campaigns with the Capital Markets Authority and the Nairobi Securities Exchange in a bid to ensure that the population seized the multiple investment opportunities. With the growth in investor numbers, CDSC introduced an SMS service which gives investors 24 hour access to their CDS accounts enabling them to keep track of their shares on their mobile phone anywhere and at any time which can be accessed by sending an SMS to 22372 and following the instructions thereof to complete the registration. In this regard, CDSC has ensured that once subscribed, investors are always aware of their current shares portfolio and of any transactions in their accounts CDSC is in the process of upgrading its system to a three-tier network centric architecture which is intended to achieve enhanced security features, through the use of technology that is more user-friendly and will increase the array of business products that CDSC can support within the capital markets in line with its strategic initiatives. This will not only increase the efficiency in the capital markets but also the speed with which shares can be turned around while increasing the spectrum of business array that CDSC can engage into.

CDSC Registrars

The incorporation and establishment of CDSC Registrars Ltd in 2009 and 2010, a subsidiary fully owned and operated by CDSC, respectively brought about a new sphere to CDSC’s successes. The CDSC Registrar Limited Company was appointed as Registrars for the Deacons Public Offer in 2011 in Kenya, while CDSC Registrars Rwanda was appointed for the Bank of Kigali and Bralirwa IPO’s in 2011. In 2014, CDSC Registrars was appointed the Nairobi Securities Exchange Initial Public Offering Registrar and processing agent, a task it successfully executed in a fully dematerialized environment. I & M and UAP insurance company are also amongst companies that have contracted the CDSC Registry Arm to handle their respective registry businesses. CDSC Registrars now manages a client base of 9 registers. In 2015, the company was appointed to offer receiving agent and registrar services for the first REITs IPO in Kenya, the Stanlib Fahari iReit. CDSC Registrars was also appointed as the registrar for M- Akiba the retail Government bond to be issued through mobile phones.

Settlement processes

CDSC introduced Settlement through the Central Bank of Kenya (CBK) which is a more robust model, to enhance Settlement finality and reduce risks associated with settling capital markets transaction with commercial bank money. CDSC is adapting to best practices and complying with global standards. The cash side of the settlement process for transactions concluded on the Nairobi Securities Exchange is now being carried out through the Central Bank’s Real Time Gross Settlement System (RTGS). Through their design, RTGS settlement systems eliminate counter party risk. It provides the ultimate risk free means of discharging payment obligations between parties due to the finality and irrevocability of debits and credits to participants’ accounts. The securities leg of the settlement process, which entails the transfer of securities between the buyers and sellers is still carried out at CDSC, with the settlement cycle T+3 being maintained.
2004 - 2015

Market contributions

CDSC has registered impressive milestones since 2004, as part of its larger mission to enhance efficiency in the capital markets. When CDSC commenced operations, the stock market in Kenya had subdued trading volumes and low levels of investor participation. This was due to the inefficient and largely manual trading system. This landscape has however since changed. Automation has contributed towards increased market activity both in the equity and bond markets. The attainment of an entirely paperless securities market, through immobilization and later dematerialization was a game changer for the market. The market turnover has increased exponentially from a low of Kshs. 15.3b (US$ 150m) in 2003 to a high of Kshs. 209.4b (US$ 2.05b) in 2015. Market capitalization grew from Kshs. 259 b (US$253.9m) in 2003 to a high of Kshs. 2.7 trillion (US$26.4 b) in early 2015. The number of shares traded per day has also grown from 46,553,983,707 shares traded between 2005 and 2012 to 1,146,903,040,463.15 shares traded between 2013 and 2015. The number of deals per year have increased from 93,300 deals in 2005 to a total of 406,632 deals in 2015 with market capitalization increasing from Khs.259 b (US$2.5m) in 2003 to Kshs. 2.7 trillion (US$26.4b) in 2015. The conclusion of the Dematerialization process in 2013 and 2014 for equities and corporate bonds respectively has enhanced CDSC’s capacity to provide more efficient services at a cheaper cost as well as protect assets under its custody. It has also realized a positive impact on market liquidity, paving the way for the introduction of products such as short selling and securities lending and borrowing in the near future. The steady improvement of the settlement cycle from T+5 cycle to T+4 and later T+3 in July 2011 which is a big development to the financial market infrastructure has tremendously increased trading activity, market liquidity and investor confidence, bringing Nairobi closer to her aim of becoming an International Financial Centre that will attract global financial services institutions.

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