Strategies Adopted by Nairobi Securities Exchange in the Establishment of Automated Trading Systems in Kenya

Abstract

This study was carried out to examine the strategies adopted by Nairobi Securities Exchange (NSE) in establishment of automated trading systems (ATS). The study was based on the rationale that adoption of automated trading systems does not only revolve around the benefits associated with the systems , but also the extent to which the organization is able to integrate the other factors such as human resources to the process of adoption. As such, the study therefore sought to answer the question of the extent to which strategies used to adopt automated trading systems had affected trading performance at NSE. This was in hope that the study would benefit the NSE management on addressing any challenges associated with the adoption of automated trading systems, and contribute the existing knowledge on technological research. The study used a descriptive research design. The study population was composed of top, middle and lower level of managers at NSE who were purposively selected to participate in the study. Both secondary and primary data were used in the study. Secondary data provided information of performance of NSE for different economic sectors in terms of the amount of shares traded before and after the introduction of automated trading systems. Primary data provided information on manager’s view on the performance of trading at NSE since and strategies used in the adoption of automated trading systems. Both quantitative and qualitative techniques were used to analyse data and draw inferences from the study finding. A multiple regression model was used to establish whether there was any significant relationship between adoption strategies and trading performance. Test of significance was done at 95% confidence level. The study findings indicate a large discrepancy in the traded shares before and after the introduction of automated trading systems. A positive relationship was found between strategies used in the adoption of ATS and trading performance. Use of strategies such as staff training, practical demonstration, capacity building and continuous improvement would increase trading performance by coefficients of 0.213, 0.920, 0.69 and 0.65 respectively. The study established that there would be a 56.2% change in trading performance as a result of strategies used in the adoption of automated trading systems. The study recommended that NSE management continuously adopt new technology to enhance efficiency in the performance of automated trading systems, integrate different strategies so as to ensure effective adoption of new or efficient use of the existing technology and increase level of stringency as far as monitoring the trading practice is concerned. The orgranziation could do so by increasing penalty or sunctions associated with malpractices. Further study should be carried out on the factors affecting the efficiency of automated trading systems at NSE, examine the relationship between employee training and their performance in the use of automated trading systems and the challenges affecting use of automated trading systems in the quest to readress the proffessional malpractices that arise from the use of Automated trading systems.