The Central Depository System is managed by the Central Depository and Settlement Corporation (CDSC) and was commissioned on 10 th November 2004. Through a process called Immobilization, the movement of paper certificates has ceased as all the details previously on paper certificates have been entered into one computerized system, the Central Depository System.
The Process of Opening a CDS Account
It is mandatory to open a CDS account in order to buy or sell shares of companies listed in the Nairobi Stock Exchange.
You will need to identify the Central Depository Agent (CDA) of choice e.g. a stockbroker or investment bank.
Complete and sign a securities account opening/maintenance form (CDS1) with your Central Depository Agent. He will assist you with this.
Provide two (2) recent passport size photographs.
Provide your original national identity card or passport together with a photocopy.
If you are a company you will need to provide an original certificate of incorporation together with a photocopy.
If you are an organization registered in any other way e.g. society, you will need to provide the original certificate of registration and a photocopy.
You will hand in and sign the form in the presence of your Central Depository Agent.
You will be left with the duplicate of the account opening form for your records.
Your CDA will provide you with your own CDS account number. Keep it confidential.
You are free to open several CDS accounts with different stockbrokers.
You can migrate from one broker to another simply by completing and signing the securities transfer form. This form is available from your broker and must be signed by your current CDA and your new CDA.
The Advantages of Opening a CDS Account
It is a faster, easier and safer way of trading in your securities. Unlike the old system where one needed to wait to be issued with paper certificates, the CDS credits your account with your shares five (5) days after date of trade.
The reduction in the number of transaction days means that you receive your money (if you are selling shares) or shares (if you are buying shares) a lot faster than before.
The extra paperwork that was associated with paper certificates was eliminated.
The CDS has eliminated problems that were traditionally associated with paper certificates like mutilation, loss.
The CDS has boosted market efficiency and reduced the costs of transactions. In the old system, a new certificate was issued and the old one cancelled each time a sale was made. This was inefficient and time consuming.