Effect of automation of bond trading on bond market performance: the case of Nairobi securities exchange

Abstract

The aim of this study was to investigate the effect of automation of bond trading on the performance o f bond market at Nairobi Securities Exchange (NSE). Specif ically the study sought to determine the effect of automated bond trading on trading volumes and to determine the effect of a utomated bond trading on market size. The study ado pted a comparative research design and the population of the study com prised of all firms trading on the bond market at t he NSE from 2005 to 2012. The data for the study was collected four yea rs before automation and four years after automatio n. Market capitalization ratio and the number of bonds traded were used to d etermine pre and post-automation bond market perfor mance. Paired t-test was used to determine whether there was a statistic ally significant difference between the pre and pos t automation period. The results of the study indicated that bond trading au tomation has a positive and a significant effect on the performance of the bond market.