CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
LLAAUUNNCCHH OOFF TTHHEE AAUUTTOOMMAATTEEDD TTRRAADDIINNGG SSYYSSTTEEMM ((AATTSS)) FFOORR
Nairobi Stock Exchange
December 7th, 2009

Remarks during the Launch of the Automated Trading System (ATS), December 7, 2009
The Chairman of the Nairobi Stock Exchange, Mr. Eddy Njoroge,
The Chief Executive Officer, Capital Markets Authority, Mrs. Stella
Kilonzo,
The Chief Executive Officer, Nairobi Stock Exchange, Mr. Peter Mwangi,
The Chief Executive Officer, Central Depository and Settlement Corporation,
Mrs. Rose Mambo,
Distinguished Guests,
Ladies and Gentlemen.
Good Morning.
It gives me great pleasure to be with you this morning at the official launch of
the Automated Trading System (ATS) for Treasury Bonds. This indeed is a
major milestone in the development of Domestic Bond market.
1. Market reforms
The Central Bank of Kenya and other stakeholders have so far undertaken
significant reforms in the Domestic Bond Market. These initiatives, which
include the introduction of the ATS, are aimed at enhancing the safety and
efficiency in the processing of secondary trading of Government securities as
well as other securities among other market activities.
2. The ATS Project
The ATS project was initiated by the Central Bank of Kenya, the Nairobi Stock
Exchange and the Capital Markets Authority. The two institutions constituted
a Technical Committee to oversee the automation of trading of Treasury
Bonds through the NSE. The main objective of this initiative was to make
bonds trading secure, efficient and a vibrant market. The expected
improvement in market activity will also improve market liquidity and
encourage more investors to participate in the bond market.
The Technical Committee, in consultation with key stakeholders, has
developed operating rules and guidelines for the proposed automated trading
of bonds through the NSE; an integrated operating system; an interface that
links the Central Bank’s CDS Registry and KEPSS (RTGS) payments system
with the NSE’s ATS trading platform to facilitate automated trading,
settlement and delivery of bonds on a Delivery versus Payment (DvP) basis.

Remarks during the Launch of the Automated Trading System (ATS), December 7, 2009
3. Main Highlights of the ATS
The following are the main highlights of the system:
i. CBK remains the Registry for Government of Kenya securities.
ii. Trading of Treasury bonds continues to take place at the NSE, and
hence does not cater for Over the Counter (OTC) trading.
iii. Stock Brokers will continue to exercise their role as agents of the
investors in placing sale and buy trade orders.
iv. Cash settlement of all trades through this system will take place
through the Kenya Electronic Payment and Settlement System
(KEPSS) also known as Real Time Gross Settlement (RTGS)
domiciled at the Central Bank of Kenya.
v. The trading process will be premised on a Delivery versus Payment
(DvP) arrangement.
vi. Transactions Settlement Cycle will be at T+3, but parties can opt to
shorten this period.
It is our sincere hope and expectation that the roll out of automated trading
for Treasury bonds, together with the recent automation of corporate bond
trading, will mark the turning point for trading of Fixed Income Securities at
the Bourse. This also comes at a time when re-opening of benchmark bonds
has been very successful, creating adequate liquidity around each bond. This
fits in very well with the roadmap for capital markets development as
envisaged in Vision 2030.
4. Recent Trading Developments
I am pleased to note that since the roll out of this new system on 27th
November, 2009, the market has witnessed renewed interest and enthusiasm
from bond traders. As of today, we have recorded 11 completed trades totaling
Kes.1.72 billion and 16 trades totaling to Kes.2.235 billion are at various stages
of processing.
As we successfully move away from the manual/open outcry method of trading
in Treasury bonds to the new system, we expect to see more activity in this
segment of the market. We trust that market players will carry out their
functions professionally, observing the highest standards of integrity and
transparency so that the investing public can reap full benefits arising from the
same.

Remarks during the Launch of the Automated Trading System (ATS), December 7, 2009
We at the Central Bank will continue to review the operations of the system
and related processes to ensure that it meets the expectations of investors and
conforms to best practice in the market.
5. Appreciation
Finally, may I take this opportunity to thank all stakeholders and members of
the ATS Technical Committee for working tirelessly to ensure that the project
succeeds.
Thank you all for your attention.