The Nairobi Securities Exchange (NSE) has shelved a planned Sh120 million upgrade of its Automated Trading System (ATS) on the back of run-away costs that saw the bourse’s net earnings dip 21.1 percent in the half year ended June 2024 to Sh54.7 million.
The ATS is the NSE’s trading platform, first activated in September 2006 when the structure of trading switched from the previous oral auction system to electronic-based auctions.
“We have halted any material upgrades that are either unnecessary or that can be delayed as we figure out what our new tech roadmap will be. We are also relooking into our existing costs to see where we are either overpaying or paying for things that we are not using. So, we will be rationalising that,” NSE chief executive Frank Mwiti, told the Business Daily.
In the half year ended June 2024, NSE’s expenses grew by 18.2 percent to Sh339.5 million even as its revenues grew by a smaller 13.8 percent to Sh429.5 million, pushing the exchange’s costs as a share of total revenue to 79 percent up from 76 percent a year earlier.
The bourse now says it is in the final stages of crafting its 2025–29 strategic plan to streamline the entity into more efficient operations.
The new strategy is due for review by the board in October.
In the days ahead, the NSE says it will be leaning more towards tech solutions that are hinged on performance-based payments as opposed to procuring solutions that saddle the bourse with heavy capital expenditure in a market whose activity is not as fast-paced.
“Our cost-to-income ratio is not the best in the market. There are two big components of costs one related to our tech and the other is staff costs. We are looking at opportunities where we could get into revenue share models so that we don’t get into a capital expenditure discussion, it becomes an operational expenditure discussion that is tied to outcomes. We have quite some opportunity to manage our tech costs,” said Mr Mwiti.
To complement its cost rationalisation drive, the exchange is on an aggressive push to diversify away from trading income which as of June 2024 accounted for 46.5 percent of its total income.
“We know we need to diversify quite well away from overreliance on trading income because in many ways it is not in our control. We are going to put more focus on our data business; the advisory business where we are targeting specific NSE-focused advisory offerings; the training business and also what tech offering we could potentially bring to market”, Mwiti said.
