Active Securities

These are securities, which are most frequently traded at the stock exchange both in terms of volumes traded as well as in terms turnover.


This refers to all business and corporate organization (ownership and management) brought under the control of a new management. It involves the process of acquiring shares with voting rights of another company with a view to obtaining or consolidating the control of that company.

Articles of Association

A document describing the purpose, place of business, and details of a company.


An agent is normally a representative of a stockbroker and does business of buying and selling securities for a return commission through the principal, the stockbroker.

All or None (AON)

This is a restriction placed on an order to execute the entire size of the order at a time without splitting it into several lots.

Allotment Letter

A document(s) issued by a company to investors showing the number of shares (securities) allotted to the applicant subscribing for such securities.  It also indicates the number and the value of shares.

Annual Report


It is a document issued annually by a company to its shareholders containing the Chairman’s statement, and the financial performance including the assets and liabilities, profit and loss and other relevant information on the company.  Publication of an annual report is mandatory for all public companies.

Annual General Meeting (AGM)

It is a mandatory meeting by law held annually by all public companies and to which all shareholders are invited to attend to discuss the affairs and performance of their companies.


Two firms, previously independent, coalesce to form one new business.

Asset (S)

The term “Assets” refers to all the properties and stock of investments including cash and bank deposits, which a company owns.

Asset-Backed Debt Securities (ABS)

Asset-backed securities are securities, which are based on pools of underlying assets such as credit card receivables, mortgage loans, and automobile loans. They are said to be “backed” by assets because the performance of asset-backed securities is dependent upon the performance of the underlying assets. Said another way, the cash flows from the underlying assets are the primary source of payments on the asset-backed securities.


At Best Order

This is an instruction from a client to a broker authorizing the broker to use his discretion and try to execute an order at the best possible price.


Authorized Securities Dealer

A bank licensed under the Banking Act or a financial institution approved by the Authority to deal in fixed-income securities listed on the Fixed Income Securities Market Segment at a stock exchange. They are required to act as market makers and dealers in this market segment; facilitate deepening of the fixed income securities market; enhance trading and liquidity in the fixed income securities market; and minimize counter party risk.


Authorized Share Capital

This is the company’s share capital, which is stated in the memorandum and Articles of Association as required by law.  Authorized share capital is given by nominal (par) share value time’s total number of shares authorized.  To increase the authorized share capital, a resolution must be passed to that effect by the majority of the shareholders and an application made to the registrar of companies for authority to increase the shares.

Automated Trading System

This refers to a computerized system of trading where trades are executed online. Here stockbrokers and other members of the stock exchange enter their trades both buy and sell orders at their offices without their physical presence at the stock exchange during trading time and the trades are matched online. When this is done trades are concluded and are then ready for settlement by the respective stockbrokers. 

Bad Delivery


The delivery of securities relating to a trade (either client to broker or from broker to broker) is considered “bad” when there are some defects in the share certificate or the transfer deed, or when it is not delivered within the stipulated period.

Bare Trustee

One who has no beneficial interest in the subject matter of the trust.


A market speculator who believes that the market prices will fall hence does sell their securities in anticipation of buying them back at lower prices in the future.

Beneficial Owner

The true owner of a security, which may, for convenience, be recorded under the name of a nominee.


A buy side of the quoted share, which is the highest price a buyer, is willing to pay to purchase a security.


These are additional shares given to existing shareholders at a specified ratio and paid for from the company’s normal revenue reserves. Bonus shares are mostly issued in lieu of paying cash dividends although a company can issue both.


These are long term fixed interest securities issued by government and corporate bodies. In effect, they are promissory notes in which the issuer makes an obligation to pay interest at specified times and intervals and to pay back the principal at maturity of the Bond. The holders of bonds get interest even if the issuer does not make a profit. (Also see Treasury bonds)


An entity engaged in the business of buying and selling securities for and on behalf of investors at a commission.


A market speculator who believes that the market prices will rise hence buys securities in anticipation to sell at a profit in the future.


The right in options contracts to buy underlying securities at a specified price at a specified time. Also refers to provisions in bond contracts that allow issuers to buy back bonds prior to their stated maturity.

Capital Gain

Capital gain is an amount realized at the disposal of securities, which is in excess of original cost. For example broker X buys 1000 shares of company Y at say Kshs. 60.00, which is a cost of Kshs. 60,000. He then sells them at Kshs. 70, which comes to Kshs. 70000. The increase of Kshs. 10,000 represents capital gains.

Capital Loss

Capital loss is a loss realized at the disposal of securities at a sale price below the initial purchase price. For example broker A purchases 1500 shares of company B at a price Kshs. 40 which comes to a cost Kshs. 60,000. He then sells them at a reduced price of Kshs. 35, which comes to Kshs. 52,500. The difference of Kshs. 7,500 i.e. between Kshs.60, 000 and Kshs. 52,500 represents capital loss.

Capital Markets

Refer to the aspect of financial markets, which provides long-term capital for investments. Capital markets foster the mobilization of savings into productive investments by providing an outlet for accumulated capital (savings) and allocating the capital to investments that bring the greatest value to the economy.

Capital Reserves

It is part of the company’s earnings that is normally not distributed as cash dividends and is made up of revaluation of assets and share premium.  It may be distributed as bonus shares to shareholders.

Capital Structure

It is the various components of a company’s long-term capital e.g. debentures, ordinary shares, preference shares etc.

Central Depository System Corporation (CDSC)

A Company approved by the Authority under section 5 of The Central Depositories Act to establish and operate a central depository system for the central handling of securities. Here all securities are immobilized or dematerialized and the dealings in respect of those securities are effected by means of entries in securities accounts without the physical necessity of certificates. The CDS permits or facilitates the settlement or registration of securities transactions without the physical necessity of certificates.

Closed –Ended Fund

A type of investment company whose securities are traded on the open market rather than being redeemed by the issuing company.


The fee charged by a broker/investment bank for services performed in buying or selling securities on behalf of a customer/investor.

Closing Date of Offer

The last day on which an offer made for subscriptions in the primary market or sale in the secondary market may be accepted.

Closing Price

The last price of the day at which a particular security was traded at the end of a trading session. This closing price is normally the opening price for that particular security on the following day’s trading session.

Convertible Bond

A bond, which may be converted under specified conditions into a specified number of ordinary shares of the issuer.

Collective Investment Schemes (CIS

Collective investment schemes are pools of funds that are managed on behalf of investors by a professional money manager who buy shares, bonds, or other securities according to specific investment objectives established for the scheme. CIS’s take the following forms


  •    A mutual fund:

    A public or external company incorporated solely to hold and manage securities orother financial assets. The company accepts funds from investors and uses those funds to buy a portfolio of securities and other financial assets and employs a professional fund manager to manage the investment. The company issues shares, which represent pro-rata share of the pool of fund assets to investors. A mutual fund is either open ended or closed ended.

  • Open -end funds:

    funds, which stand ready to repurchase their shares from the holders in any quantity and whenever the holder should desire. They also sell shares in any quantity to prospective investors at whatever time the investors determine

  • Closed- end funds:

    funds which issue a fixed number of shares and do not stand ready to repurchase their shares from their shareholders when they decide to sell them. The Law requires that closed ended funds be listed on an exchange in order to provide liquidity to the shareholders. These shares are traded at prices determined by the forces of supply and demand.

  • Unit Trust (s):

    These are collective investment vehicles that pool funds together from small investors by issuing units (specified absolute minimum lots of shares of the trust).  These investors normally share the same financial objective.
    A unit trust is constituted by a document known as the trust deed and a professional manager manages the funds.

Corporate Governance

Corporate Governance refers to the manner in which the power of a corporation is exercised in the running of the corporation’s total portfolio of assets and resources with the objective of maintaining and increasing shareholder value with the satisfaction of other stakeholders in the context of its corporate mission.

Credit Rating Agency

A professional whose role is to give an objective and independent opinion on the general creditworthiness of an issuer of a debt instrument, and its ability to meet its obligations in a timely manner over the life of the financial instrument based on relevant risk factors including the ability of the issuer to generate cash in the future.


This terms means “with dividend”, “with bonus” or “with rights”.  The buyer of the security is entitled to a dividend, bonus declared or rightly to subscribe for further shares.


This term means “with dividend”.  The buyer of such security is entitled not only to the share but also to a dividend that has been declared but has not been paid yet.


A company approved by the Authority to hold in custody funds, securities, financial instruments or documents of title to assets registered in the name of a collective investment scheme, local investors, East African investors, or foreign investors. Every investment adviser and fund manager that manages discretionary funds shall appoint a custodian for the assets of the fund.


This means the act of buying, selling or agreeing to buy or sell or trade shares by either a fund manager or stock dealer.

Debenture Stocks

A debenture is an acknowledgement of debt by a company.  Debentures may be secured against certain specific properties of the company.  However, debentures may also be unsecured or may be convertible to equity at a future date, to be exchanged for the company’s ordinary shares at the holders’ option depending on the agreement.  Interest on debentures is payable on specified dates whether or not there are sufficient profits.


Debt Securities


Debt securities are fixed income securities with a fixed rate of return and are guaranteed, no voting rights and no benefits from exceptional performance by a company. They include bonds, debentures, notes, or other similar instruments representing or evidencing indebtedness whether secured or otherwise


This refers to the process of removing a company from the official list of the stock exchange as a result of inaction or poor performance, failure to fulfill the exchange rules or failure to meet the listing requirements or the financial specifications.

Dematerialized Securities

A book-entry security that has been prescribed by the central depository whereby the physical certificate is no longer recognized

Derivative Instruments

Financial assets whose value is dependent on the value of an underlying asset such as ordinary shares, bonds, currencies or commodities. They include forwards, futures, options and swaps. They are used for risk management or hedging in anticipation of future markets directions.



It refers to an increase in the number of shares of a company’s stock, causing the value of each share to decrease.

The number of shares increases when the company offers new stock to the public to raise cash; or when employees exercise their stock options; or when holders of convertible bonds convert their bonds to stock; or after the issue of a bonus. Companies that can afford to will frequently buy back issues of stock to fight dilution.

A Collective Investments Scheme may suffer reduction in the value of its portfolio due to factors like dealing costs incurred in dealing in its underlying investments and of any spread between the buying and selling prices of such investments.

Discretionary Account

A type of account with a broker/investment bank in which the investor authorizes the broker to buy and sell securities, selected by the broker, at a price, amount, and time the broker believes to be best.


It is part of a company’s profits, which is distributed to shareholders as cash after it has been declared and approved in an annual general meeting (AGM). The amount of profits not distributed is retained as reserves of the company.

Dividend per Share

It is the total dividends paid divide by the total number of issued and fully paid shares.  It is therefore the amount of dividends paid for each share.

Dividend Yield

It is the return (yield) on every shilling invested in securities normally expressed as a percentage.  It is the dividend per share expressed as a percentage of the market price per share.

Earnings per Share (EPS)

This is the monetary value of profit after tax on each ordinary share derived by dividing net income by the number of ordinary shares outstanding.  It is a measure of a company’s profitability.

Eligible Securities

A security, which has been prescribed by a security exchange to be immobilized with a central depository

Equity Financing

Equity finance refers to risk capital or funds raised from the capital markets by issuing securities such as shares.  It is the financing of the companies’ activities using shareholders funds.

ESOP (Unit Trust)

Employee Share Ownership Plans or Employee Stock Option Plan

An ESOP is an option to buy a company’s share at a certain price. This price can be the market price or some other price. Normally, to make an ESOP attractive, the option price is lower than the market price. The company has the freedom to specify how many shares an employee gets, which employees get them, and when the ownership is actually transferred.

It is a Collective Investment Scheme (CIS) in the form of a unit trust. Stock options are the instruments that are offered to employees, allowing them to buy a certain number of shares in the company at a specific price. This price could either be lower than the current market-price of scrip-in which case their gains are immediate-or the same, whereupon future jumps in the share-price will show up as profits for them.


This is the opposite of “cum-dividend”.  The purchaser of a security, which has been declared as “ex-div”, will not be entitled to dividends when it is paid.  The security exchange marks this “XD” beside the security on the daily official trading list.  Normally, the price is adjusted to reflect the dividend payment.


This terms means “without dividend”, “with out bonus” or “without rights”. The buyer of a security, which has been declared as “ex-all”, will not be entitled to dividends when it is paid, bonus shares and rights issues when declared and issued.

Face Value

The amount of money, which the issuer of a bond promises to repay to the bondholder on or before the maturity date.

Financial Instrument

Any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

Financial Markets

Refers to money markets and capital markets, which constitute the financial system. The money market refers to the short-term aspect of the financial markets, whereas the capital markets refer to the long-term aspects, the cut-off point being the duration of one year.

Financial Plan

An ongoing process where an investor relates his financial position to his Investment objectives within a constantly changing financial environment.

Fund Manager

This is a market professional who manages a portfolio of securities for and on behalf of investors. They do this by promulgating research and analysis on the stock market and use this to make investment decisions at a fee. Investors pool together their investments so that they can be managed as collective which then reduces the cost of managing the portfolio of securities.

Futures Contract

An obligation to buy or sell a commodity or a financial instrument on a date in the future at a fixed price.

Guaranteed Bond

A bond guaranteed as to the interest and principal by a third party, usually a larger, better known, or more credit worthy than the issuer of the bond.


This means reducing exposure to risk of loss resulting from fluctuations in exchange rates, commodity prices, interest rates etc.


This refers to the process whereby physical share certificates are deposited with the central depository with the view to having them eventually having them entered into electronic form ready for trading.

Immobilized Securities

Securities where the underlying physical certificates have been deposited with and are held by a central depository.


A contract underlying a bond issue. The issuer of the bond and the trustee acting for the bondholders or the bondholders themselves sign the contract and it sets the rights and responsibilities of the issuer, trustee and bondholders, and the terms of the security issue.


Statistical composition that measures changes in the economy or the financial markets, normally stated as a percentage from a base year. An index measures the up and down of the prices of such items as consumer goods and services market, shares and bonds market, and commodities market.

Information Memorandum

This means any prospectus or document, notice, circular, advertisement, or other invitation in the print and electronic form containing information on a company or other legal person authorized to issue securities.


Initial Public Offering (IPO)

An IPO is an offer made to the public to subscribe for securities by an issuer for the first time.  An IPO is also termed as “going public.”


This means any person who, is or was connected with a company or is deemed to have been connected with a company, and who is reasonably expected to have access, by virtue of such connection to unpublished information which if made generally available would be likely to materially affect the price or the value of the securities of the company, or who has received or had access to such published information.


This refers to a company, corporation, government or body corporate offering (or having already offered) securities for sale to investors or to the public.


The payment a corporate or governmental issuer makes to bondholders in return for the loan of money.


A person or an institution that uses his savings or borrowings to buy securities.

Investor Compensation Fund

A fund to compensate investors who suffer loss resulting from the failure of a licensed broker or dealer to meet its contractual obligations.


An Investment is a commitment of funds to one or more assets that will be held over some future time period, in the hope that it will generate more income. The assets could be tangible like real estate properties or intangible monetary assets like securities. Investments are based on financial goals and objectives.

Investment Adviser

Licensed person(s), who engage in the business of advising their clients as to the value of securities and whether it is advisable to invest, purchase or sell securities. Investment advisers also carry out analysis or reports concerning securities and can manage portfolios of investment under a contract or an agreement with investors.

Investment Bank (s)

Non-deposit taking institutions that advise on offers of securities to the public or a section of the public, corporate financial restructuring, takeovers, mergers, privatization of companies, underwriting of securities, etc. They can also engage in the business of a stockbroker, a dealer, and fund manager of collective investment schemes and provider of contractual portfolio management services.

Investment Company

A company engaged primarily in the business of investing in securities.


The term “Issuer” refers to any company or other legal entities whose securities are the subject of an application for listing in Kenya or have been listed.

Issued Share Capital

This is the amount of capital, which has been subscribed to and fully paid out of the authorized share capital of a company.

Last Day to Register or Books Closing Date

The day by which securities must be lodged with the company’s office to qualify for dividends, rights or bonus shares.

Limit Order

An order placed by a customer with a broker stipulating a limit as to the price at which shares are to be bought or sold.

Margin Account

A type of account with a broker-dealer, in which the broker agrees to lend the customer part of the amount of due for the purchase of securities.

Market Capitalization

This is the estimated worth of the company derived by multiplying the current market price by the number of shares issued and outstanding at a specified period.

Market Price

The market price refers to the ruling price of shares on the trading floor of the exchange at any given time. The market price of share is normally a indicator of the level of demand of that security.

Material Information

This means any information that may affect the price of an issuer’s securities of influence investment decisions and includes; a merger, acquisition or joint venture, a block split or stock dividend, earnings and dividend of an unusual nature, a significant law suit against the issuer etc.

Maturity Date

The date specified in a commercial paper, note, bond, or other evidence of debt on which the debt is due and payable. Maturity depends on the terms of the debt.


The combining of two or more firms into one firm where the shareholders of the combining firms retain their powers, rights and benefits in the new firm. It is also called uniting of interests. There is potentially no acquirer nor acquiree and the combining entities are almost of equal size.

Money Market

This is market for short-term debt securities with maturity of one year or less. They include treasury bills, certificates of deposits, commercial paper, and repurchase agreements (REPOS)

Money Market Fund

Generally, a mutual fund/unit trust which typically invests in short-term debt securities such as government securities, commercial paper, and certificates of deposits of banks.

Mutual Fund

A pool of stocks, bonds, or other securities purchased by a group of investors and managed by a professional/registered investment company. The investment company itself is also commonly referred to as a mutual fund.

Net Asset Value

The value of one share of a unit trust / mutual fund at a given point in time, which is calculated by adding up the value of all the unit trust / mutual fund portfolio and dividing by the number of outstanding shares.

Odd Lots

This is a lot which is less than the stipulated Board Lot.  For example a Board Lot at the Nairobi Securities Exchange comprises a trade of more than 200 shares or more than Kshs 3,000 in value and anything less than this is an Odd Lot.


This is the opposite of a bid.  It is the lowest price at which a stockbroker or dealer is willing to sell a security on behalf of a client or as a principal respectively. Sometimes referred to as the “Ask”.

Offer Period

This refers to the period during which an offer for subscription or sale of securities to the public remains.

Offer for

This refers to the process whereby a company announces its intention to issue new shares at a certain price and therefore invites the public to apply for them through a prospectus.

Open Outcry

“Open outcry system” refers to a system of trading at the stock exchange floor whereby brokers shout their bids and offers of securities on behalf of their clients.


This is a contract between a dealer and a buyer, which gives the latter the right to buy, call option, or sell, put option, a given number of shares at a fixed price within a given period.

a.       Call  Option

An option that that gives the owner a right to buy a security at a set price (strike price) for a predetermined period of time

b.       Put Option

This is an option allowing the holder the right to sell a security at a specific price within a specific time period.

Over-The–Counter (OTC) Market

This is a market for buying and selling stocks through a network of telephone and telecommunications system rather than going through the stock exchange. It is sometimes referred as “off-board” trading.

Over The Counter (OTC) markets operate parallel to organized securities exchanges and generally involve trading in securities not listed on the securities exchange. As suggested by the phrase “Over the Counter”, the market entails the display of securities over the counter by traders on behalf of sellers. They are not advertised or displayed formally but are brought to the attention of prospective buyers or investors only upon request.

Paid Up Capital

Paid up Capital refers to the amount of money paid by shareholders of the company and is a total of all shares issued multiplied by the par value for each share.

Par Value

The face value or principal or maturity value of a security appearing on the face of the security instrument. For a traded security, the par value is for bookkeeping purposes only. It is the value given to shares when they are created and has very little relevance to the real value (market price). Dividends are expressed as a percentage of this value.


The entire set of security holdings of an individual or institution, or a group of securities in which members of the public are invited to acquire shares pursuant to a Collective Investment Scheme (CIS). A portfolio may include preference shares, ordinary shares and bonds of various companies.

Potential Ordinary Share

A financial instrument or other contract that give the holder the right to purchase ordinary shares. Warrants and options are examples of financial instruments that give the holders the right to purchase ordinary shares.


This is the act of transferring government owned assets (i.e. state owned enterprises) into private hands or general public, either through public offering, tender or private contract.  The act is also referred to as divestiture since it entails divestment by the government.


An authorization by a shareholder of a company transferring his/her right to vote to another person through written instructions.


A document, notice, circular, advertisement or any other invitation offering to the public for subscription (or purchase) any shares or securities of a company or a mutual fund. It must explain the offer, including the terms, issuer, objectives (if mutual fund) or planned use of the money (if securities), historical financial statements, and other information that could help an individual decide whether the investment is appropriate for him/her. It is also called offering circular or circular.

Public Offer

A public offer is an offer made by a company to the public to subscribe to new or existing shares being offered for sale to the public as in the privatization exercise.

Price Earning Ratio (P/E)

The P/E ratio refers to the number of times it takes a shareholder to recoup his investment in a share. It is given by the market price of a share over its earnings per share.  It is the pay back period of a share.

Primary Market

This refers to the initial offering of a security as well as the activities of investors subscribing to securities being offered by the issuer. In the primary market, the investors buy the securities directly from the issuer as
opposed to the secondary market.

Private Placement

The sale of securities directly to institutional investors, such as banks, mutual funds, insurance companies, pension funds, and foundations. Does not require CMA registration, provided the securities are bought for investment purposes rather than resale, as specified in the investment letter.


This means a person acting alone or in conjunction with others directly or indirectly who takes the initiative in forming or organizing the business of a collective investment scheme but does not include an underwriter commission without taking part in the founding of the collective investment scheme.

Prompt Lots

These are transactions in securities, which must be delivered by 3 o’clock of the same trading day.

Public Company

A public company is a limited liability company, which is not a private company.  A public company, which is listed, may not have any restriction on the transfer of shares.

Quotation (Quote)

This is the price at which a security may be bought or sold at any given time at the stock exchange.  The quoted prices of security vary from time to time depending on demand and supply of the security.


Registration refers to the act of entering into a company’s register the names and addresses of all shareholders.  Thereafter, a shareholder receives a share certificate made out in his name and receives reports, circulars and dividends issued by the company.

Rights Issue

This is an offer to the existing shareholders to subscribe for a new issue, usually at a preferential price, in proportion to their existing shareholdings.When doing a Secondary Market Offering of shares to raise money, a company can opt to do a rights issue to raise equity. With the issued rights, existing shareholders have the privilege to buy a specified number of new shares from the firm at a specified attractive price within a specified time.

Revenue Reserves

This is part of the company’s retained earnings that is distributed to shareholders as bonus or dividends in the future or may be used for company expansion.

Retained Earnings

Amounts that a company has re-invested in the business over the years and is usually a cumulative figure.  Retained earnings are increased by net income and decreased by loses and the declaration of bonus.


The term Scrip refers to share certificates.

Scrip or Stock Dividend

This refers to a share that is issued to existing shareholders in lieu of dividend.

Secondary Market

The market in which securities are traded after their primary offering. An organized stock exchange and over the counter market are examples of secondary markets.


Financial instruments or legal documents signifying either an ownership position in a company (i.e. shares) or a creditor relationship with a company or Government (i.e. stocks and bonds)


Securitization of assets is a process by which loans, leases, receivables and other relatively illiquid assets with common features are packaged into interest bearing securities with marketable investment characteristics and put in the secondary market.

It is an arrangement, which involves the transfer of assets or risks to a third party where such transfer is funded by the issuance of debt securities to investors. Payments to investors in respect of the debt securities are primarily derived, directly or indirectly, from the cash flows of the assets or revenue streams generated by the entity regularly.

Settlement Period

The time prescribed with reference to the date of trade (T) within which brokers are required to deliver the security and pay for the trade through the Nairobi Securities Exchange.


A share is a unit of ownership. It is also referred as equity. When one purchases a share in a company he/she becomes a part owner in that company. He/she will be entitled to certain rights e.g. dividend, voting etc. There are different types and they include the following:

Ordinary shares– shares that give the shareholder part ownership of the company in proportion to the number of shares held and entitle him to dividends.  It is the risk capital that is entitled to residual claim assets in the event if liquidation.

Preference shares - shares bearing a fixed annual rate of dividend with a prior right over all ordinary shares in the distribution of dividends from annual profits and have a prior claim to repayment of capital on winding up of the company.

Redeemable preference shares – preference shares that can be redeemed by the company either at fixed dates and prices, or on certain specified terms at the discretion of the board.

Convertible preference shares – preference shares, which may be converted under specified conditions into a specified number of ordinary shares of the issuer. 

Share Certificate

This is a document, which shows ownership of shares.  It can be used as collateral in acquiring a loan.

Short Sale

This is the sale of securities, which are not owned. The short seller borrows the securities with the intent to return them at a later date when he hopes to buy them back at a lower price hence making a profit.

Special Purpose Vehicle

This is an entity, which issues asset-backed debt securities and must satisfy certain criteria stipulated under the guidelines for issue of asset-backed debt securities. Its operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt. A corporation can use such a vehicle to finance a large project without putting the entire firm at risk.


This means the difference between the bid and the offer prices of a security. It is normally categorized according to the price of the particular securities. It is usually used as a threshold within which trades are concluded.

Sponsoring Broker

This refers to a stockbroker who is appointed by an issuer seeking listing to liaise between the company, CMA and the stock exchange in the process of ensuring that the issue is successful.

Stock Market Index

The Index is a measure of stock market trends and performance. The index may be used as an indicator of the movement (up and down) of the stock market prices. An upward movement in the index shows that on the average, the shares are appreciating. The index is therefore a weighted average of the market performance (see also Index).


A market professional who buys and sells securities on behalf of clients at a Stock Exchange in return for a brokerage commission.

Stock Dealer

A person who carries on the business of buying, selling, dealing, trading, underwriting or retailing securities as a principal (i.e. on his own account).

Stock Exchange

This is an organized and licensed market for the buying and selling of listed securities (shares, stocks and bonds). On this market, individuals and companies can buy shares of companies through Licensed Stockbrokers and dealers hence become part-owners lenders to or creditors of the listed companies or the Government. Currently, the Nairobi Securities Exchange (NSE) is the only licensed exchange in Kenya.

Stop Order

An order with an instruction to either buy or sell once a specified price has been reached. A buy stop order is entered above the current market price whereas a sell stop order is entered below the current market price.

Stop Limit Order

An order to buy or sell only at a designated price once the market reaches a specific level. The stop and limit price can be the same or can be different. For a sell stop limit order, the price is placed below the prevailing market level whereas for a buy stop limit order, the price is placed above the prevailing market level.

Trade Volume

The total number of shares traded in a single security during a given period. Also refers to the total number of shares traded on an exchange during a given time period.

Trading Floor

The arena or area of a stock exchange where trading takes place.

Treasury bill

A non-interest bearing obligation with a maturity of one year or less, fully guaranteed by the Kenyan Government, payable to the bearer. Treasury bills offer the government short-term financing and are sold on a discount basis so that the yield is the difference between the purchase price and the face value thereof.

Trade Volume

The total number of shares traded in a single security during a given period. Also refers to the total number of shares traded on an exchange during a given time period.

Trading Floor

The arena or area of a stock exchange where trading takes place.

Treasury bill

A non-interest bearing obligation with a maturity of one year or less, fully guaranteed by the Kenyan Government, payable to the bearer. Treasury bills offer the government short-term financing and are sold on a discount basis so that the yield is the difference between the purchase price and the face value thereof.

Treasury Bond

This is a fixed interest security issued by Government as source of long-term funds and are issued with a maturity of more than one year.


A legal arrangement in which an individual

(the trustor) gives fiduciary control of property to a person or institution (the trustee) for the benefit of beneficiaries


An individual or organization, which holds or manages and invests assets for the benefit of another. The trustee is legally obliged to make all trust-related decisions with the trustee’s interests in mind, and may be liable for damages in the event of not doing so. Trustees may be entitled to a payment for their services, if specified in the trust deed. In the specific case of the bond market, a trustee administers a bond issue for a borrower, and ensures that the issuer meets all the terms and conditions associated with the borrowing In relation to a unit trust means a trustee in which are invested the money, investments or other CIS portfolio that are subjected to trusts governing the unit trust

Trust Deed

The trust deed that sets out the trusts governing the unit trust or mutual fund every instrument that varies those trusts and their operations


These are specialized advisers who undertake the risk of the success or the failure of a public floatation.  There are basically three types of underwriting agreements:

a)      Firm contracts – the underwriting firm purchases the issue as a block for a commission and agrees to pay the issuer the full value of the security on or before the closing date of the issue, whether it is fully subscribed or not.

b)    Stand by contract – the underwriter is obliged to mop all issues, which the issuer could not sell through some, other distributive channels.

c)    Best effort contract – the underwriter agrees to sell as much of the securities as he can at an established price but with no responsibility for unsold proportion.

Venture Capital Fund

A company incorporated for purposes of providing risk capital to small and medium sized business, which are new and have a high growth potential but without ready access to markets, whereby not less than 80% of the funds so invested consist of equity or quasi equity investment in eligible enterprises. This is often accompanied by managerial support and board administration. This capital can take the form of ordinary shares, preference shares, convertible loans or other equity or quasi equity instruments. Very simply defined, Venture capital is capital invested in a project where there is a substantial element of risk, especially money in a new venture or an expanding business in exchange for shares in the business. It is not a loan.


A Corporation instrument which offers the holder the right, not an obligation, to subscribe for new ordinary shares at a predetermined exercise price within a stipulated exercise period. Warrants become worthless after the expiry of the exercise period.

Central Depository Agent

A CDA is a Central Depository Agent either a stockbroker or a custodian bank who has been authorized by CDSC to open accounts in CDS on behalf of investors.

Who is a Custodian?

A Custodian is an independent agency who holds the physical custody of the Financial

Securities owned by an investor of the CDSC.

Who is a Registrar?

A registrar is the entity that carries out share transfers, transmission and consolidation of

shares of on behalf of a company and attends to queries relating to non-receipt of

dividends on shares of the company.