Currency trading is set to grow in East Africa as one of the region’s largest and most established financial trading venues plans to introduce currency futures contracts. The Nairobi Stock Exchange, part of Africa’s big-four elite exchanges, will roll-out the new contracts this year which gives investors and corporates the ability to hedge and manage currency exposure through the online contracts.
An official at the NSE spoke about developments of the product at a financial analysts’ forum in the city. The NSE has been battling with policy makers on the introduction of the new contracts. Terry Adembesa, product manager, commented at the forum: “We already have approvals from the regulator.”
Nairobi Going Global
The NSE will become the second major exchange that caters to the needs of forex derivatives traders. South African-based venue the Johannesburg Stock Exchange was a front-runner in the region offering currency derivatives to both domestic and international users. Furthermore, the JSE became the first venue in the continent to offer an extended range of domestic currency contracts.
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The exchange is expected to launch new currency futures contracts that trade against the Kenyan Shilling. Kenya is one of Africa’s best-performing economies with an average annual growth rate of 5%. Furthermore, its pro business attitude and investment approach is attracting new funds into the country. A similar theme pervaded the stock exchange with performance outperforming its peers. In 2013 the stock market rose 44%, with a 17% increase in 2014.
The new FX futures products will support the exchange’s international growth strategy as global fund managers will have risk management products to safeguard their investments. Kenyan firms such as Safari.com and M-Pesa have attracted global attention.
Africa has been developing its financial markets infrastructure in order to compete with other emerging market nations. Several exchanges have partnered with developed venues such as Euronext and Deutsche Borse in order to take heed of their technological expertise.