Central Bank of Kenya (CBK) has announced a new trading portal, Dhow CSD, which can be used by securities traders to manage their finances and investments.
Dhow CSD is a secure and efficient system for holding and transferring ownership of government securities, such as Treasury bills and bonds.
The Dhow CSD will now be the primary system for trading government securities in Kenya, meaning that investors will now not be forced to visit CBK physically.
It can be used by commercial banks, investment banks, and other financial institutions, as well as individual investors.
Benefits
The Dhow CSD offers a number of benefits to investors, including speedy and efficient settlements made on a T+0 basis, which means that investors receive their securities on the same day that they purchase them.
According to CBK, Dhow CSD is a highly secure system, with multiple layers of protection to prevent fraud and unauthorised access.
The system also provides real-time information on the prices and trading volumes of government securities so as to give traders actionable intelligence which is very helpful for decision-making.
It is linked to the CBK's Real Time Gross Settlement (RTGS) system, which ensures that payments for securities are made and settled in real time.
Like other financial management systems in the country, Dhow CSD is regulated by the CBK, which helps to ensure its security and efficiency.
How to Trade on Dhow CSD to Trade Treasury Bills and Bonds
Here are the steps on how to use Dhow CSD to trade government bills and bonds:
1. Open a CDS account with a licensed commercial bank or investment bank.
2. Fund your CDS account with cash or securities.
3. Log in to the Dhow CSD trading platform/ Create an account.
4. To create an account, you need ID, KRA Certificate, Passport Photo, ID or Passport, and bank account details.
5. Select the government bills or bonds that you want to trade.
6. Enter your bid or ask price.
7. Submit your trade order.
8. Monitor the status of your trade order.
9. Once your trade order is executed, you will receive your securities in your CDS account.
Here are some additional details:
1) To open a CDS account, you will need to provide the following information to your licensed commercial bank or investment bank:
i) Your name
ii) Your national ID number
iii) Your contact information
iv) Your bank account details
v) You can fund your CDS account with cash or securities. If you fund your account with cash, the funds will be credited to your account immediately. If you fund your account with securities, the securities will be transferred to your account within 24 hours.
vi) The Dhow CSD trading platform is a web-based platform that you can access from any computer with an internet connection.
vii) When you select the government bills or bonds that you want to trade, you will see the current bid and ask prices. The bid price is the price that you are willing to pay to buy the securities. The ask price is the price that you are willing to sell the securities for.
viii) When you enter your bid or ask price, you are placing a trade order. A trade order is an instruction to the Dhow CSD to buy or sell securities at a specified price.
ix) Once your trade order is submitted, it will be displayed on the Dhow CSD trading platform. If your trade order is matched with another trade order, it will be executed and the securities will be transferred to your account.
x) You can monitor the status of your trade order by logging in to the Dhow CSD trading platform.
Difference Between Treasury Bonds and Bill
Treasury Bills are short-term debt securities issued by the government of Kenya. They are typically issued with maturities of 91 days, 182 days, or 364 days. T-Bills are sold at a discount to their face value, and investors earn a return by buying T-Bills at a discount and then receiving the full face value at maturity.
Treasury Bonds are medium- to long-term debt securities issued by the government of Kenya. They are typically issued with maturities of 1 year or more.
Bonds pay interest periodically, usually, semi-annually, and investors earn a return by buying T-Bonds at a discount to their face value and then receiving the full face value at maturity, plus the interest payments.
Bills are typically considered to be a lower-risk investment than T-Bonds, because they have a shorter maturity. However, T-Bonds typically offer a higher yield than T-Bills, because they have a longer maturity and therefore more risk.
The minimum investment amount for T-Bills is Kshs. 100,000, while the minimum investment amount for T-Bonds is Ksh50,000.
T-Bills are not traded on the secondary market, while T-Bonds are traded on the secondary market. This means that if you want to sell your T-Bills before maturity, you will have to sell them back to the government.
However, if you want to sell your T-Bonds before maturity, you can sell them to another investor on the secondary market.
