See we are back in the trenches again.
The proposed OTC for bonds to work alongside the NSE is a nonsense. Especially at a time when the trend is to move away from trading public financial instruments in the bar. If JSE with more sophisticated financial infrastructure has realised the inherent corruptness of an OTC, why would we be wanting to go there?
My view is that even shares should all be traded in a transparent market i.e. its very easy to create a market for the likes of Transcentury, Telkom et al with lower requirements...

@wa-ithaka

You are missing the point (not the first time)... the MAJOR reason the banks want an OTC is coz of the outrageous fees charged by brokers, NSE & CMA...

A pity stock investors dont boycott the bastards for their horrendous charges!

kizee. I don't know how much cma wants to charge the banks for the license, do tell me...so who would comprise the membership of the otc? And do free market principals really apply to banks, particularly when they're backed by a central bank...if we had free banking principles wouldn't banks take on the liquidity risk in the HRT mart and not borrow from CBK overnight windows...

Okay I'm not a bond trader so I may confuse some issues but don't you think short selling will lead to abuse, cos they're no profit caps on bond prices (like in equities)...could they manipulate prices all in the name of making a market? What did you mean, by bond guys adding value?

@vvs. so what I'm understanding is that brokers/nse/cma are milking too much from banks...it sounds like they've been making billions...if the commissions structure is the issue why not just amend them. Who are the beneficiaries of the primary bond market? Now banks want control of the secondary market as well.

@wa - huh?

Try clicking on the here bit of the post.
If charges are the issue, why not deal with that?

I found this post fraught with key inaccuracies. Commissions charged on bond trades on the NSE is 0.04% much lower than the 0.15% CBK pays for primary issues to brokers for deals submitted and obviously much lower than the 1.5% paid for equity trades. I am on the buyside of the market and i can tell you one way of destroying the bond market is to allow an OTC or allow banks to trade on their books outside the market. I have traded on the Jozi bond exchange as well.

The next big question our lazy regulator-CMA and NSE respectively haven't figured out is what stops fund managers and insurance companies to ask for the same licences or to be part of the OTC opportunity once banks are allowed to have their way what happens to the rest of the market, ignore the bloomerg /reuters kafuffle! the market goes beyond those with these terminals. Banks argue that they have most of the fixed income instruments but that's not entire correct from a trade / NSE perspective. Remove the untradeable T-bills and its actually fund managers and insurance companies who should be presenting this case. Further to that, the bonds we should address besides the untradeable T-bills are the trading books of banks (bonds held for trading) because that's what they come to the market with, the rest is buy for keeps and has nothing to do with brokers or the NSE. Now the largest bond trading book of all these banks is KCB's at 4B. Stanchart has 3B BBK somewhere around there. Some small banks with less than a billion are making most noise. On the other hand, FM's entire bond books are all available to the market. So why are banks making noise that they need to be given permission to trade under the darkness(OTC)...its simply because most or all of them dont know how to trade bonds, they keep churning portofolios without a proper trading strategy. They do orodha which is make a margin at all costs..Now that used to work when they could organize the deals outside the market (which was OTC by all definitions of the practical world except the writings on the white board at Nation center)and make reasonable margins. The trading dealers would call around the market and fix a deal between themselves and then call the broker(s) to go write the deal on the board. The brokers would agree on the time they were heading there to write the trade on the white board, on their way there they had enough time to meet at the stanley for a smoke / coffee before proceeding to Nation center to write the trade on the board. The dealers fixed the trades shafted their employers at will, got huge bonuses etc.

Enter ATS, you can nolonger fix anything as blatantly, margins have been squeezed some what, the employer is putting pressure on you to reproduce yester years genius numbers. What do you do, you blame the establishment argue brokers don't add value and go after that brokers margin while all along the big reason for the hue and cry is permission to fix trades. Ask yourselves, fund managers have lots of analysts in their establishments but still use brokers who clearly don't add much value to their decision making process or trading anyway but you will never hear queries from them about brokers or wanting to go OTC because they respect the need for a structured market with specialist roles. How is it that these bank dealers majority of whom are ill equipped to trade bonds lack analysts in their dealing teams have figured out brokers don't add value 10+ years after starting to trade yet they in the real sense of the world don't know what they are doing most of the time. I don't mean to be arrogant but take a dealer from any of nairobi's banks and take him to trade in a slightly advanced market and see whether they will make even a quarter of the gains they make and also do the same with fund managers for comparison...it's simple the game was easy for them pre ATS when they could fix trades. ATS is slowly exposing them and now they want to take us backwards and continue fixing trades, their poor employers have no clue they are being strung along. I am alarmed Peter Mwangi actually is entertaining this nonsense....if banks don't want to trade bonds they can go to hell with their trading books anyway. Imagine if we all asked to trade with ourselves in the financial services sector, would there be any intermediaries such as banks. I am jsut wondering, what if a dealer did a Jerome Carvell move, what would happen to the counter party. Our Bank dealers are being very lazy, if your broker doesn't add value, go to the one who does or make your broker work for the money and leave the structure alone. FM's make equity dealers work for the money...they do their equity and fixed income research but give more trades to the brokers who comes with the best research and trade ideas.....Bank dealers are only interested in their jobs and their pay not the market's lon gterm interests. Isn't it funny they are making most noise after automation of bond trading which has more trading volumes yet they were less spirited before when volumes were lower.....they simply can't make the spreads they were making even with large trade volumes

so how does OTC exclude players other than banks from trading bonds?that seems to be ur main gripe...kindly explain

what happens? they get acess to tighter liquidity and more transparent prices...it doesnt preclude a well capitalized broker and fund managers from participatin really...kenya is yet to license primary dealers FYI

vvs..ur very rite...imagine tradin a bond at zero comiss...thats what otc can accomplish

There can be no zero commission but it can be very low... making them more 'tradeable'...

What the brokers & CMA do not understand is that a liquid bond market can create the basis for OTHER tradeable instruments like interest rate options, etc... aka derivatives...