By Cynthia Kenyani
The Central
Depository and Settlement Corporation (CDSC) has suspended the new Ksh100
monthly charge on stock market accounts after investors protested the extra
cost of trading at the Nairobi Securities Exchange (NSE).
This Sh 100
monthly fee had taken effect on Monday after what the CDSC said was a 60-day
consultation with stakeholders.
“We will advise
all CDSC account holders and our agents on the way forward in due course. In
the meantime, the status quo before the reference communication on the same
remains.” CDSC spokesperson said in a statement.
CDSC, which
facilitates holdings of shares in electronic accounts opened by shareholders
and manages the process of transferring shares traded at the stock exchange,
said it had recalled the notice to allow for further consultations with the
regulator and market stakeholders.
The latest published annual report for 2020
shows CDSC had about Ksh1.5 million accounts out of which Ksh1.1 million were
actively trading.
The charge will
earn CDSC six times the revenue collected that year of Ksh308 million which the
platform made from charging transactions, deposits, registry fees, and bond
levy.
The new charge
that had been set to roll out in July would have earned CDSC over Ksh1.8
billion annually but would have increased the cost of investing on NSE where
trades can attract charges of up to two percent of the transaction value.
Mr. Nkoregamba Mwebesa ,Chief Executive Officer ,CDSC. [COURTESY]
According to the
CDSC Chief Executive Officer Nkoregamba Mwebesa the proposed fee would ensure
the Corporation’s financial sustainability while allowing it to support new
products such as securities, lending and borrowing.
“We want to be
very equitable and very fair to all of our shareholders, but we can only do
that if we remain financially sustainable and are able to maintain our costs,”
Mwebesa commented.
CDSC has been forced to shelve the new charge
that would see account holders pay Ksh1,200 annually for fear it might have led
to massive account closures.
The market
platform has not indicated timelines, whether they will scrap the charge or
whether it will be a reduction of the maintenance fee.
“With regard to
the CDS account maintenance fee, CDSC would like to announce that it has
entered into further consultations with the Capital Markets Authority (CMA) and
other stakeholders,” CDSC said.
The upcoming
charge will boost earnings and dividends for its principal shareholders,
including Capital Markets Challenge Fund, Nairobi Securities Exchange, AKS
Nominees, Capital Markets Investor Compensation Fund, and the Uganda Securities
Exchange.
The new charge
will help CDSC make money from active and idle accounts where the platform was
not collecting any revenues from those who do not trade. Idle accounts, mostly
held by individuals, stood at Ksh385,411.
Data from the CDSC shows 1.64 million
CDS/trading accounts as of the end of March 2022, Ksh1.2 million of which are
dormant.
