What is a CDS account and why do you need it?

If you intend to invest in the shares of companies listed on the Nairobi Securities Exchange (NSE), then you will need to have a CDS account. The CDS in the name stands for Central Depository System.

What is a CDS account?
A CDS account acts as the store of your NSE shares. When you buy shares, they will be deposited into the account. Similarly, when you sell shares, they will be taken from the account to be transferred to the buyer. You can think of a CDS account as a bank account that holds shares or stocks instead of cash.

An entity called Central Depository and Settlement Corporation (CDSC) facilitates CDS account transactions. What CDSC does is that it handles clearing and settlement of all securities traded on the Nairobi bourse. CDSC is authorized by the Capital Markets Authority, Kenya’s stock market regulator, to carry out this function.

CDS account opening form
Investors open a CDS account by completing a form called CDS 1. You can open a CDS account through a CDSC authorized stockbroker. Open successfully opening the account, the broker will issue you with your CDS account number as well as a duplicate copy of the CDS account opening form. For the security of your CDS account, you will set up a secret question and answer with the broker for purposes of identifying you.

CDS account statement
Investors receive monthly statements from CDSC detailing the transactions on their CDS account. But you can also request a CDS account statement any moment you need it. Your CDS account statements will be sent to your email or postal address. But you can also obtain CDS account mini statement through SMS on your phone.

Finally, seeing the important role that CDS account plays in Kenya’s stock market, you should watch out for those who say they can help you buy and sell NSE shares without a CDS account as they may not be legitimate stockbrokers.