The Central Bank of Kenya (CBK) has announced a new trading portal, Dhow CSD, that securities traders can use to manage their finances and investments.
Dow CSD is a secure and efficient system for holding and transferring ownership of government securities such as Treasury bills and government bonds.
The dhow CSD will become the primary system for trading government securities in Kenya, meaning investors will no longer need to physically visit the CBK.
It can be used not only by individual investors but also by financial institutions such as commercial banks and investment banks.
CBK Governor Kamau Tuge speaking at the Monetary Policy Committee (MPC) meeting on June 27, 2023.
photograph
CBK
advantage
The Dow CSD offers many benefits to investors, including: Fast and efficient payments It is done on a T+0 basis. This means that investors receive their securities on the same day they purchase them.
According to CBK, Dhow CSD is a highly secure system with multiple layers of protection to prevent fraud and unauthorized access.
The system also provides real-time information on the price and trading volume of government securities, providing traders with actionable information that is extremely useful for decision-making.
Linked to CBK Real-time gross settlement (RTGS) systemThis ensures that payments for securities are made and settled in real time.
Like other financial management systems in the country, the Dow CSD is regulated by the CBK, which helps ensure its safety and efficiency.
How to trade Treasury Bills and Government Bonds with Dhow CSD
Here are the steps to trade government notes and bonds using the Dow CSD:
1. Open a CDS account with a licensed commercial or investment bank.
2. Deposit cash or securities into your CDS account.
3. Login to Dhow CSD trading platform/ Create an account.
4. To create an account you will need: ID card, KRA certificate, passport photo, ID card or passport, bank account details.
5. Select the government note or bond you wish to trade.
6. Enter your bid or ask price.
7. Submit your trading order.
8. Monitor the status of your trading orders.
9. Once your trading order is executed, you will receive the securities in your CDS account.
Additional details include:
1) To open a CDS account, you must provide the following information to a licensed commercial or investment bank:
i) your name
ii) your national ID number;
iii) Your contact information
iv) Bank account details
v) You may fund your CDS account with cash or securities. If you deposit cash into your account, the funds will be credited to your account immediately. If you deposit securities into your account, the securities will be transferred to your account within 24 hours.
vi) Dhow CSD Trading Platform is a web-based platform that can be accessed from any computer with an internet connection.
vii) Select the government note or bond you wish to trade and the current buy and sell prices will be displayed. The bid price is the price you are willing to pay to buy a security. The ask price is the price at which you want to sell the security.
viii) Entering the buy or sell price will place a trading order. A trading order is an instruction to Dow CSD to buy or sell a security at a specified price.
ix) Once the trading order is submitted, it will be displayed on the Dhow CSD trading platform. If your trading order matches another trading order, the order will be filled and the securities will be transferred to your account.
x) You can monitor the status of your trading orders by logging into the Dhow CSD trading platform.
Central Bank of Kenya, Nairobi.
photograph
Central Bank of Kenya.
Difference between government bonds and short-term securities
Treasury bills are short-term bonds issued by the Kenyan government. Typically issued with maturities of 91, 182, or 364 days. T-Bills are sold at a discount from their face value, and an investor earns a return by purchasing his T-Bill at a discount and receiving the full face value at maturity.
Government bonds are medium- to long-term bonds issued by the Kenyan government. They are typically issued with maturities of one year or more.
Bonds pay interest periodically (usually semi-annually), and investors receive income by purchasing T-Bonds at a discount to face value and receiving the full face value plus interest payments at maturity.
Because bills have shorter maturities, they are typically considered a lower-risk investment than T-bonds. However, because T-Bonds have longer maturities and therefore greater risk, they typically offer higher yields than T-Bills.
The minimum investment amount for T-Bill is Kshs. 100,000, the minimum investment amount for T-Bond is Ksh 50,000.
T-Bills are not traded in the secondary market, whereas T-Bonds are traded in the secondary market. This means that if you want to sell a treasury bill before maturity, you must sell it to the government.
However, if you wish to sell your T-Bond before maturity, you can sell it to another investor in the secondary market.
File Photo of person using mobile phone
photograph
BBC news
