Nairobi Securities Exchange which launched the trading on future contracts known as “NEXT Derivatives Market” last week is offering its investors index futures and single stock futures of the most heavily traded companies on the bourse.

The NEXT Derivatives Market will offer investors index futures contracts on the NSE-25 share index and single stock futures on Safaricom, KCB Group, Equity Group, EABL and BAT.

Derivatives in this case can be termed as an investment tool whose value is derived from an underlying asset like bonds, commodities, currencies, interest rates, market indexes and stocks based on the expected future price movement of the asset. They allow investors to make a gain or hedge against losses by taking a bet on the future price movement.

The listed futures will have quarterly expiry dates and will all be initially settled in cash. The futures contracts are expected to allow investors to diversify their portfolios and deploy capital more effectively. They are also expected to deepen liquidity on the exchange, which has 65 listed companies.

NSE chief executive Geoffrey Odundo, had this to say, “The newly launched NEXT Derivatives Market will enhance investors portfolio performance by making available risk management tools in the wake of increasing asset price volatility in both domestic and international markets.”