Blow for small investors as CDSC introduces Sh1,200 account fee


Securities trader at Nairobi Securities Exchange trading floor at the Exchange Building in Nairobi.

Photo credit: File | Nation Media Group

Analysts have warned that the Central Depository and Settlement Corporation Limited’s (CDSC) move to slap investors with an annual account maintenance charge of Sh1,200 will further cripple the struggling Nairobi bourse.

The company, which clears securities transactions at the Nairobi Securities Exchange (NSE), told investors on Monday through emails and text messages that it would charge them Sh100 each month for “account maintenance”.

“Dear Investor, effective July 15, 2022, CDSC will introduce a CDS account maintenance fee of Sh100 per month payable annually,” said the company.

This comes as about 97 percent of equities accounts used for trading at the NSE have been dormant in the past two years, underlining reduced interest by investors in the equities market at the bourse.

Only 61,000 of the 2.03 million share accounts at the CDSC have participated in trading over the two years, representing a three percent share.

Analysts said the charge will further deter retail investors from opening or reactivating their trading accounts which will further hit Kenya’s capital markets with previously highly performing stock losing demand, plunging investors into losses.

“Equities transactions are already overtaxed, we pay five different levies to CDSC, NSE, and CMA (Capital Markets Authority). What this will do is it will deter retail investors from participating in the market,” said Kevin Ngige, an equities dealer at Genghis Capital.

“This is akin to taxation by the government, where as much as the taxman collects good revenues, a significant population suffers from the heavy taxation. This is bad for our capital markets,” he said.

Equities turnover at the NSE has fallen in seven of the past eight years since hitting an all-time annual high of Sh215.7 billion in 2014.

The Economic Survey 2022 shows the total number of shares traded at the NSE has nearly halved from 7 billion shares in 2017 to just 4 million shares traded in 2021 while the number of deals fell from 284,982 to 277,611.

This comes just months after the NSE introduced day trading in a move that was billed as a game-changer by allowing investors to buy and sell shares during the same day to boost activity at the bourse.

But same-day trading has underwhelmed, with CMA data showing that shares worth Sh784 million were traded through day trading between its launch date in November 22 and January 20.

This as the NSE traded shares worth Sh23 billion during the period, with day trading accounting for 3.4 percent of the trades, highlighting that investors have not taken on same-day trading as the bourse had hoped.