The Nairobi Securities Exchange (NSE) has announced it will begin trading single stock futures from Monday, 7th July 2025, in a major step aimed at boosting activity in Kenya’s derivatives market.

In a statement issued on 3rd July 2025, NSE Clear the clearing and settlement arm of the exchange outlined the initial margin requirements for five newly approved securities set to trade as single stock futures. The move is expected to enhance market depth, offer risk management tools to investors, and attract institutional participation in Kenya’s fast-evolving financial markets.

The initial margin the minimum deposit investors must hold to open a derivatives position has been disclosed for contracts maturing between September 2025 and June 2026. The five approved companies include Kenya Power & Lighting Company (KPLC), KenGen Plc (KEGN), Kenya Reinsurance Corporation (KNRE), Liberty Kenya Holdings Ltd (LBTY), and Britam Holdings Plc (BRIT).

According to NSE Clear, the margin requirements will vary based on contract maturity dates. For instance, KPLC’s futures contract will require KSh 4,000 for the September 2025 expiry, progressively increasing to KSh 4,300 by June 2026. Britam’s margin will begin at KSh 1,100 and rise to KSh 1,500 over the same period.

Below are the disclosed initial margin requirements in Kenyan Shillings (KES):

The trading of single stock futures provides investors with tools to hedge risks, speculate on stock price movements, or gain exposure to key equities with lower upfront capital. NSE’s latest move follows global financial market trends where derivatives play a critical role in price discovery and liquidity.

The products are part of NSE’s broader strategy to deepen the derivatives market, which includes index futures and other equity-linked instruments. The launch of single stock futures is being implemented under the NSE Derivatives Market (NEXT), which is licensed and regulated by the Capital Markets Authority (CMA). All futures contracts will be settled through NSE Clear, which also guarantees the performance of contracts and manages margin calls.

Investors and market participants can refer to the NSE operational procedures guide on calculating initial margin requirements through the link: https://www.nse.co.ke/derivatives/operational-procedures

Any inquiries can be directed to the derivatives desk via: derivatives@nse.co.ke

Analysts believe that single stock futures will particularly appeal to institutional investors such as pension funds, asset managers, and hedge funds seeking to hedge or leverage positions. The selected companies for the futures contracts reflect a mix of utilities, insurance, and financial services firms that command notable trading volumes on the NSE.

“Products like these will provide investors with options during both bull and bear markets,” noted a Nairobi-based financial analyst. “In volatile times, the ability to short stocks or hedge portfolios will be crucial.”

Moreover, the futures contracts are expected to improve liquidity for the underlying stocks, providing a virtuous cycle of investment, price discovery, and transparency. Futures contracts are standardized legal agreements to buy or sell an asset at a predetermined price on a specific future date.

In the context of the Nairobi Securities Exchange, single stock futures allow investors to speculate or hedge against price movements of individual listed companies such as KPLC, KenGen, or Britam. These instruments provide both retail and institutional traders with opportunities to manage portfolio risk, especially during periods of market volatility.

By requiring only an initial margin deposit, futures trading offers leveraged exposure, making it possible to control a large position with a relatively small upfront investment. The introduction of single stock futures on the NSE aligns with global financial practices and reflects the exchange’s efforts to diversify Kenya’s capital markets.

As trading volumes grow and investors become more familiar with derivatives, futures contracts could enhance market liquidity and deepen financial inclusion. They also foster price discovery by reflecting market sentiment and expectations about future stock performance. With regulated oversight from the Capital Markets Authority and centralized clearing through NSE Clear, the infrastructure ensures risk management and credibility, paving the way for broader adoption of futures trading in the region.