Market Structure, Trading Venues and Settlement
This domain tests how trades execute, clear and settle, and which institution performs each function. The exam separates the exchange, the regulator, the CSD and the central bank.
Venues and participants
- The Nairobi Securities Exchange is the principal securities exchange, approved and regulated by CMA; it operates the Main Investment Market Segment, Alternative Investment Market Segment and Growth Enterprise Market Segment, and hosts bond and derivatives activity.
- Trading is through CMA-licensed brokers/dealers on the automated trading system; NSE membership is separate from CMA licensing.
- CDSC is the central securities depository; securities are held in book-entry form. The exchange/CDSC cycle is T+2 for equities; government securities settle through CBK's DhowCSD platform.
- Delivery-versus-payment, failed-trade and buy-in rules, and corporate-action processing are part of market structure.
Worked example
An investor buys 1,000 NSE-listed shares. The order goes through a CMA-licensed broker to the NSE trading system, where it is matched. Clearing follows, and on T+2 CDSC credits the securities against payment. If the seller fails to deliver, exchange and CDSC failed-trade rules, including buy-in, apply. The reasoning: trading, clearing and settlement are distinct functions performed by different entities.
Traps
Thinking CBK settles equities; confusing the exchange with the CSD; assuming instant settlement; ignoring corporate actions; assuming OTC trades are outside the regulatory perimeter.