Effects Of Automation Of Bond Trading On Bond Market Performance In The Nairobi Securities Exchange

Nairobi Securities Exchange (NSE) is considered as developing securities market and for many years has faced many challenges due to its low liquidity. NSE has continued to grow and implement reforms and innovations in order to raise their levels of efficiency. Between 2002 and 2009 a series of reforms were undertaken through the market regulator-Capital Markets Authority (CMA) and the exchange itself. Whether these reforms have improved the performance of bond market still remains unknown. The aim of this study was to investigate the effect of automation of bond trading on the performance of bond market at Nairobi Securities Exchange (NSE). Specifically the study sought; to determine the effect of automated bond trading on transactions cost, trading volumes, liquidity and growth of market size at the NSE. Data collection sheet was used to collect data from the NSE database spanning from January 2005 to December 2012. The data was divided into two sub periods corresponding to the pre-automation (January 2005-December 2008) and post automation period (January 2009-December 2012). The study adopted a comparative research design. The population comprised of all firms trading on bond market at the NSE from 2005 to 2012. This study used secondary data. Secondary data that targeted bond trading between the period 1 January 2005 and 31 December 2012 was identified from the NSE bulletins. The data collected was analyzed using descriptive statistics, correlations, and linear regression analysis. The influence of bond automation trading on the transaction cost is high and significantly affects its changes. The study findings indicated that; there is significant influence of bond market automation to the performance of the listed companies at NSE.