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You can now ‘borrow’ shares for trading at bourse

The trading floor at Nairobi Securities Exchange. (Photo: Beverlyne Musili/Standard)

You will soon be able to sell shares of a company which you do not directly own if the Capital Markets Authority (CMA) introduces short selling.

A short sell is where you borrow shares of a company, sell them in anticipation that their prices will fall and when they do, pay back your lender and remain with the profit.

CMA has already drafted a framework to introduce the product that will not be charged additional taxes, and will be protected against winding up of companies. The framework for securities lending and borrowing is expected to be included in this year’s budget.

“Tax neutrality will make sure that as we introduce this new product that will result in the transfers of securities we can manage the tax cost of these transfers of securities so there is no additional tax expense,” CMA boss Paul Muthaura said Thursday in Nairobi.

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