Under pressure CDSC freezes Sh1,200 account fee plan


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

Photo credit: File | Nation Media Group

The Central Depository and Settlement Corporation Limited (CDSC) has bowed to pressure and frozen its plans to slap investors with an annual account maintenance charge of Sh1,200, a move that would have further crippled the struggling Nairobi bourse. The company, which clears securities transactions at the Nairobi Securities Exchange (NSE), had on Monday told investors 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. 

The decision triggered uproar from the public as analysts warned that the charges may trigger account closures by small investors.

The CDSC yesterday said it had opened more consultations with stakeholders and the Capital Markets Authority on the matter.

“In the meantime, the status quo before the reference communication on the same remains,” it said in a statement.

The plans to introduce the account fees came even as about 97 percent of equities accounts used for trading at the NSE remained 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 would have further deterred retail investors from opening or reactivating their trading accounts which will further hit Kenya’s capital markets with previously high performing stocks 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, whereas 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 on November 22 and January 20.

This even 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.
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