CMA to introduce securities lending and borrowing

By Carol Njenga

The Capital Markets Authority is set to introduce securities lending and borrowing into the market before the next financial year once the relevant regulations are in place.

CMA Chief Executive Paul Muthaura says securities lending is vital as it will increase overall market liquidity and flexibility of financing and in return boost the capital markets efficiency through price discovery.

The Capital Markets Authority rolled out a 10 year Master Plan meant to encourage the deepening of the capital markets.

In their quest however, CMA says it has encountered several challenges such as the need for stronger market infrastructure, increased diversification of financial products and services to cater to the growing needs of investors and issuers, as well as the need to improve the level of awareness among potential and existing investors regionally and internationally.

Muthaura says improved liquidity, or volume and pace of trading, in capital markets is also vital to improving the attractiveness of the market through ensuring easier entry and exit.

To this end, the Financial Services Volunteer Corps, the U.S. Securities and Exchange Commission and Bloomberg have partnered with the Capital Markets Authority and other industry stakeholders to provide technical assistance that will help increase liquidity in the capital markets.

The partnership will also help address regulatory and market-based impediments to liquidity, and advice on the development of new products and services to improve market access.

Muthaura says CMA is in the final stages of developing securities lending and borrowing regulations adding that all stakeholders involved are putting the final touches on the relevant legislation which will allow the introduction of securities lending and borrowing before the beginning of the next financial year.