The derivative trade in Kenya has not been possible in the past because all along it required some legislation to support such trade.
Attempts to introduce derivatives in Kenya
Before the signing of Capital Markets Amendment Bill by President Uhuru Kenyatta during the Christmas even of 2013, it was hard to introduce derivatives in Kenya. One Allan Thomson tried to do so on July, 2013 but in vain. This was the same problem in Zambia. Zambia is the second derivative exchange market in Africa. Kenya is likely to be the third country in the continent to engage in derivative market.
Understanding the derivative market?
As at June 2012, The Bank of International Settlements estimated that the OTC derivatives market was valued at USD $ 749 trillion. This is a clear indicator that if Kenya embarks in derivative trading, she stands to gain a lot from the large quantities of money involved.
What is a derivative?
A derivative is a financial instrument that derives its real value from another source. This can be an underlying asset or economic index and other factors.
The derivatives are called financial instruments but note that they are not intended to raise finances.
The most common forms of derivatives are:
1.Futures
2.Forwards
3.Swaps
4.Options
If you have something tell us what you know about derivatives feel free to tell us in the comments sections.
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