In 1996, the largest share issue in the history of NSE, the privatization of Kenya Airways, came to the market. Having sold a 26% stake to KLM, the Government of Kenya proceeded to offer 235,423,896 shares (51% of the fully paid and issued shares of Kshs. 5.00 each) to the public at Kshs. 11.25 per share. More than 110,000 shareholders acquired a stake in the airline and the Government of Kenya reduced its stake from 74% to 23%. The Kenya Airways Privatization team was awarded the World Bank Award for Excellence for 1996 for being a model success story in the divestiture of state-owned enterprises. In 1998 the government expands the scope for foreign investment by introducing incentives for capital markets growth including the setting up of tax‐free Venture Capital Funds, removal of Capital Gains Tax on insurance companies' investments, allowance of beneficial ownership by foreigners in local stockbrokers and fund managers and the envisaged licensing of Dealing Firms to improve market liquidity.
With effect from January I, 1999, Kenya adopted the International Accounting Standards (IAS) as the local accounting standards.
In August 2000, NSE implements a new trading cycle, (T+5). The Central Depository System (CDS) Act and the amended CMA Act (which covers Collective Investment Schemes (CIS)) are passed by Parliament and receive presidential assent, paving the way for the full implementation of the CDS and for the introduction of collective investment schemes in the Kenyan market.
Following the signing of a partnership agreement with the Association of National Numbering Agencies (ANNA) in September 2000, the NSE was appointed as the National Numbering Agency (NNA) for Kenya. The NNA is responsible for issuing the ISIN for financial securities issued under Kenyan jurisdiction in accordance with the ISO 6166 guidelines issued by ANNA.
In October 2000 NSE becomes a member of the Association of National Numbering Agencies (ANNA), the global securities numbering agency.
In April 2002 CMA announced the approval of the new NSE trading and settlement rules. The amount for block trades was revised upwards from Kshs. 3.0 million to between Kshs. 50.0 – 200.0 million. The block trade rules now apply to trade values of above Kshs. 50.0 million but less than Kshs. 200.0 million. Lastly, the brokerage commissions’ regime was liberalized.
July 2002 saw the foreign investor regulations amended, providing for a 25% minimum reserve of the issued share capital for Kenyan citizens, while the balance of the 75% becomes a free float for all classes of investors. Within this 75% share holding available to all classes of investors, there is no restriction on the amount to be held by a single foreign investor.
The signing of the shareholders’ agreement for the Central Depository and Settlement Corporation (CDSC) was done in August 2002. The shareholders consisted of the Nairobi Stock Exchange (20%), the Association of Kenya Stockbrokers (18%), the CMA Investor Compensation Fund (7%), and 9 institutional investors through the Capital Markets Challenge Fund (50%) who collectively invested in the Central Depository and Settlement Corporation (CDSC). The CDSC being the legal entity that owns and runs the clearing, settlement, depository and registry system for securities traded in Kenya’s capital markets.
As of November 2002, the NSE became the sole NNA in Kenya, responsible for allocating the unique code for quoted and unquoted securities domiciled in Kenya.
In March 2003 the CDSC in collaboration with the NSE commenced the CDS Education Campaign in preparation for the market automation. The first CDS Education Workshop, with the theme “The CDS Legal & Regulatory Framework” kicked off.
For the year ending 31 December 2003, the exchange recorded an equity turnover exceeding Kshs. 15.25 billion, more than the combined equity turnover recorded in the previous five years.
The NSE celebrated its Golden Jubilee in 2004, and also had the privilege of hosting the 8th ASEA conference. In this celebration, the first NSE magazine dubbed “The Exchange” and, The Central Depository & Settlement Corporation (CDSC), which manages Central Depository Systems, were both launched.
For the year ending 31 December 2004, the exchange recorded an equity turnover exceeding Kshs. 22.32 billion; an increase of 46.37% over the corresponding period for 2003.
For the year ending 31 December 2005, the exchange recorded an equity turnover exceeding Kshs. 36.52 billion (a 63.61% increase over the previous year’s performance of Kshs. 22.32 billion),