Nairobi Securities Exchange Ushers in a New Era of Inclusive Trading with Rule Amendments: What it means for Investors

NAIROBI, KENYA – July 19, 2025 – The Nairobi Securities Exchange PLC (NSE) is set to usher in a transformative era for equity trading with significant amendments to its trading rules, effective August 1, 2025. These pivotal changes, formally approved by the Capital Markets Authority (CMA), are poised to democratize stock market participation, enhance flexibility for investors, and foster a more dynamic financial ecosystem in Kenya.

The Demise of the Odd Lot Board, Buying/Selling Shares in Multiples fo 100s

Perhaps the most groundbreaking and investor-centric amendment is the reduction of the minimum board lot to 1 security on both the Normal Board and the Restricted Normal Board. This critical adjustment effectively phases out the previous requirement where investors could only buy or sell shares in multiples of 100, a trading practice commonly referred to as "odd lots."

To illustrate the profound impact of this change, let's consider Stanbic Holdings Limited (SBIC), a prominent financial institution listed on the NSE. As of yesterday, July 18, 2025, Stanbic Holdings Limited closed its trading session with a share price of Ksh 173.50.

Under the old rules, an aspiring investor interested in Stanbic Holdings Limited would have been required to purchase a minimum of 100 shares. This would translate to an initial investment of:

Old Rule Minimum Investment: 100 shares * Ksh 173.50/share = Ksh 17,350

For many retail investors, students, or those just beginning their investment journey, a minimum outlay of Ksh 17,350 could represent a significant barrier to entry, potentially deterring them from participating in the stock market altogether.

However, with the new rules taking effect on August 1, 2025, an investor will now be able to purchase a single share of Stanbic Holdings Limited. This dramatically alters the entry point:

New Rule Minimum Investment: 1 share * Ksh 173.50/share = Ksh 173.50

This stark contrast highlights the unprecedented accessibility that the NSE is now offering. An investment that previously required Ksh 17,350 can now begin with just Ksh 173.50 before transaction and brokerage fees. This change is not merely cosmetic; it is a fundamental shift that will unlock investment opportunities for a broader spectrum of the Kenyan population. It means that individuals with smaller savings can now directly own a piece of leading companies like Stanbic Holdings, participate in their growth, and potentially benefit from dividends and capital appreciation.

A Boon for Dividend Investors

The impact of these rule changes is particularly significant for dividend investors, who prioritize generating regular income from their investments. Previously, an investor seeking to earn dividends from a stock like Stanbic Holdings would have faced the same high entry barrier.

Consider Stanbic Holdings Limited, which previously declared a dividend of Ksh 18.90 per share.

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Under the old rules, to receive any dividend income from Stanbic, an investor would have had to purchase at least 100 shares, incurring a cost of Ksh 17,350. For an investor with, for example, only Ksh 500 available for investment, participating in such dividend-yielding opportunities was simply out of reach. They would have been completely excluded from enjoying the income stream offered by established, dividend-paying companies.

However, with the new rules, this scenario changes dramatically. An investor with a modest capital of Ksh 500 can now purchase two shares of Stanbic Holdings (Ksh 173.50 * 2 = Ksh 347, before transaction and brokerage fees). If Stanbic continues its dividend policy, this investor, who previously couldn't participate, would now be eligible to receive:

Dividend Income (New Rule): 2 shares * Ksh 18.90/share = Ksh 37.80

While Ksh 37.80 might seem like a small amount initially, it represents a crucial starting point for dividend reinvestment and the power of compounding. For many, this marks the first time they can truly participate in the dividend-paying cycle of a blue-chip company. This newfound ability to acquire even a single share means that income-focused investors, regardless of their capital size, can now strategically build a portfolio designed for regular cash flow. It opens the door to:

• Building a Dividend Portfolio Incrementally: Investors can now gradually accumulate shares in dividend-paying companies over time, buying one or a few shares whenever they have surplus funds. This "Shillings-cost averaging" approach can smooth out investment costs and build a substantial dividend income stream over the long term.

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• Access to High-Quality Income Stocks: Many stable, established companies that pay consistent dividends often have higher share prices. The old minimum lot size excluded many from these opportunities. Now, these income-generating assets are within reach.

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• Financial Inclusion and Empowerment: The ability to earn dividends, even small amounts, from reputable companies fosters a sense of financial inclusion and empowerment. It allows more Kenyans to participate in the real economy and benefit directly from corporate profits.

Beyond Accessibility: The Ripple Effects for All Investors

The phasing out of the odd lot board extends beyond just lowering the entry barrier; it introduces a new level of flexibility and strategic opportunity for all investors:

• Precision in Portfolio Management: Investors will gain unparalleled precision in managing their portfolios. Instead of being forced to buy or sell in increments of 100, they can now acquire or divest the exact number of shares they desire. For instance, if an investor wants to rebalance their portfolio and needs to reduce their Stanbic Holdings exposure by just 5 shares, they can now do so directly, rather than being compelled to sell 100 shares and then repurchase 95 elsewhere. This granular control allows for more optimized asset allocation strategies.
• Enhanced Diversification, Even with Limited Capital: Diversification is a cornerstone of sound investment strategy, aiming to reduce risk by spreading investments across various assets. With the ability to buy single shares, investors with smaller capital can now diversify across a wider number of companies. Imagine an investor with Ksh 5,000. Under the old rules, they might only afford to buy shares in one company if the price per share was below Ksh 50. With the new rules, they could potentially invest in 20-30 different companies, even if their individual share prices are above Ksh 100, by buying just one or two shares of each. This significantly empowers investors to build more resilient and diversified portfolios from the outset.
• Encouraging New Market Entrants: The psychological barrier of a high minimum investment will be largely removed. This will likely encourage a new wave of retail investors, including young professionals, students, and those in the informal sector, to explore equity investments. Increased retail participation can contribute to deeper market liquidity and a more vibrant trading environment.

Refined Closing Price Determination: A Focus on True Market Value

Another crucial amendment pertains to the determination of a security's closing price. Moving forward, the Volume Weighted Average Price (VWAP) will be the standard for calculating the closing price of an equity security. This VWAP will be applied to transactions executed during the entire trading session, provided that the cumulative volume in a security is greater than or equal to one hundred shares or units in that session. The VWAP is calculated as follows:

• VWAP = Total value traded in period / Total volume traded in period

This method provides a more accurate representation of a security's average price over the trading day, taking into account the volume of shares traded at different price points. For example, if Stanbic Holdings Limited traded heavily in the morning at Ksh 174, but less frequently in the afternoon at Ksh 173, the VWAP would reflect the higher volume at around the Ksh 174 price, providing a more representative average for the day.

However, recognising scenarios with minimal trading, the rules stipulate that if a security cumulatively trades less than one hundred shares or units in a given session, its average price will default to the previous average price reported by the NSE. This ensures that thinly traded securities do not have their closing prices unduly influenced by a few small trades, which can maintain stability and historical continuity for less active counters. If no trades occur in a session, the equity reference price will be the average price from the last trading day.

The Road Ahead: A More Inclusive and Dynamic NSE

These progressive rule changes, slated for implementation on August 1, 2025, signal the NSE's unwavering commitment to modernizing its trading infrastructure and fostering a more inclusive and dynamic capital market. By making investment more accessible and providing more nuanced pricing mechanisms, the NSE is not just amending rules; it is actively shaping a future where the benefits of capital markets are within reach for every Kenyan investor, big or small. This truly marks a new era where opportunity is not just discovered, but actively created for all.

For more information, visit www.nse.co.ke