This is part of a series of articles sponsored by NIC bank. NIC will be having a rights issue starting 27th August. Read more about their rights issue here.

In 1951, an Estate Agent by the name of Francis Drummond established the first professional stock broking firm.  He also approached the then Finance Minister of Kenya, Sir Ernest Vasey and impressed upon him the idea of setting up a stock exchange in East Africa. The two approached London Stock Exchange officials in July of 1953 and the London officials accepted to recognize the setting up of the Nairobi Stock Exchange as an overseas stock exchange.

 In 1954 the Nairobi Stock Exchange was then constituted as a voluntary association of stockbrokers registered under the Societies Act.  Since Africans and Asians were not permitted to trade in securities, until after the attainment of independence in 1963, the business of dealing in shares was confined to the resident European community. At the dawn of independence, stock market activity slumped, due to uncertainty about the future of independent Kenya. 

1988 saw the first privatization through the NSE,of the successful sale of a 20% government stake in Kenya Commercial Bank. The sale left the Government of Kenya and affiliated institutions retaining 80% ownership of the bank. (from The Nairobi Securities Exchange website)

The Nairobi Securities Exchange (called the Nairobi Stock Exchange until 2011) is Kenya’s single stock exchange where shares of listed companies are traded by stock brokers on behalf of shareholders (read more on the role stockbrokers play in the NSE here). The NSE is run by a board of directors who appoint a Chief Executive Officer.

The NSE is currently located at the Nation Centre in Nairobi with the exchange opening for trading at 9:00am and closing at 3:00pm on all weekdays (excluding public holidays).

The NSE currently has 4 indices used to measure the performance of stocks.

1. The NSE All Share Index (NASI) that is a weighted index of all the listed companies on the exchange.
2. The NSE 20-Share Index that is a weighted index of 20 blue chip companies using market capitalization, shares traded, number of deals and turnover as criteria for inclusion in the index.
3. The FTSE NSE Kenya 15 representing the performance of the largest 15 stocks trading on the NSE, ranked by full market capitalization.
4. The FTSE NSE Kenya 25 Index representing the performance of the 25 most liquid stocks trading on the NSE.

The Nairobi Securities Exchange is currently pursuing a process that will end with the NSE getting demutualised, that is, shares of the NSE will be tradable on the stock exchange itself. The purpose of this is to separate ownership from management of the NSE while keeping along with global trends.