The Capital Markets Authority (CMA) in Kenya recently moved from the traditional “board lot” system (where investors had to buy a minimum of 100 shares at a time) to allowing purchases in single units. This change is part of a broader push to deepen market participation and liquidity.
Why the CMA allowed single-share trading
- Retail investor inclusion – With many Kenyans unable to afford 100 shares of higher-priced counters (e.g., Safaricom, BAT, EABL, Equity), reducing the minimum lowers the entry barrier. A student, boda-boda rider, or small saver can now start with as little as the price of one share.
- Market liquidity – Smaller trade sizes increase the number of buy/sell orders, making it easier to match trades. Liquidity is crucial for healthy price discovery.
- Digital/mobile brokerage growth – Integration with apps and M-Pesa micro-investing platforms fits better with micro-lot trading than the old 100-share minimum.
- Global best practice – Most developed exchanges (NYSE, LSE, JSE) already allow trading in lots of 1. Kenya is aligning with that standard.
Short-term effects
- Increased participation – A surge of retail investors entering the market with very small amounts, especially in popular stocks like Safaricom.
- Higher transaction volumes – More trades will be recorded, but many will be of very low value.
- Brokerage system strain – Systems may see more micro-trades, raising questions on whether commissions/fees are sustainable for small trades.
- Speculative behavior – New, less financially literate entrants may treat the stock market like sports betting, buying single shares for “fun.”
Long-term effects
- Deeper financial inclusion – More Kenyans can own equities, leading to broader wealth distribution and savings culture.
- Improved liquidity & price discovery – Over time, a thicker order book smooths volatility and narrows bid-ask spreads.
- Shift in brokerage business models – Firms may need to revise fees, perhaps moving toward flat-fee or percentage-based charges that don’t penalize micro-investors.
- Potential for fractional investing later – Once the culture of micro-investing sets in, the next logical step could be allowing fractional shares (like U.S. fintechs do).
- Capital raising appeal – If more citizens are active in equities, firms may find it easier to raise money locally rather than relying on debt or foreign investors.
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