NSE 25 SHARE INDEX
Nairobi Securities
Exchange
GROUND RULES FOR GENERATION OF NSE 25 SHARE
INDEX
v1.3
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
DOCUMENT CONTROL
Version Control
Version # Date Description of change Reviewer Approver
1.0 03/04/18 Review of Constituents (Inclusion of NSE & Operations Trading
removal of HF Group) Department Committee
1.1 12/03/19 Change of name of Committee Operations Trading
Change in Section 12 (Inclusion of timeline for Department Committee
publication)
Change in document format
1.2 17/05/2019 Review of Constituents (Inclusion of Kenya Operations Trading
Airways & removal of KenolKobil) Department Committee
1.3 14/08/2020 Review of Constituents (Inclusion of Jubilee Operations Trading
Holdings & removal of Kenya Airways) Department Committee
DOCUMENT LOCATION
After approval, this document will be published on the NSE website https://www.nse.co.ke/products-
services/resource-center/information-products-and-services/ground-rules-nse-kenya-index-
series.html
DOCUMENT REVIEW AND APPROVAL
Review
Drafted by Operations Department
Reviewed by Operations Department (2018)
Operations Department (2019)
Operations Department (2019)
Operations Department (2020)
Status Final
Version 1.3
Original Release Date 1st September 2015
Approval
Approved by Trading Committee
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
Date
Signature
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
TABLE OF CONTENTS Exchange
SECTION 1 ........................................................................................................................................................................................ 5
INTRODUCTION ........................................................................................................................................................................ 5
SECTION 2 ....................................................................................................................................................................................... 6
NSE RESPONSIBILITIES ............................................................................................................................................................. 6
SECTION 3 ....................................................................................................................................................................................... 7
ELIGIBILITY CRITERIA ................................................................................................................................................................ 7
SECTION 4 ....................................................................................................................................................................................... 8
PERIODIC REVIEW OF CONSTITUENT COMPANIES.......................................................................................................... 8
SECTION 5 ....................................................................................................................................................................................... 9
RESERVE LIST ............................................................................................................................................................................. 9
SECTION 6 .....................................................................................................................................................................................10
CHANGES TO CONSTITUENT COMPANIES ......................................................................................................................10
SECTION 7 .....................................................................................................................................................................................11
NEW ISSUES ...............................................................................................................................................................................11
SECTION 8 .....................................................................................................................................................................................12
CHANGES TO CONSTITUENT WEIGHTINGS.....................................................................................................................12
SECTION 9 .....................................................................................................................................................................................13
CORPORATE ACTIONS AND EVENTS .................................................................................................................................13
SECTION 10 ...................................................................................................................................................................................14
INDEX CALCULATION...............................................................................................................................................................14
SECTION 11 ...................................................................................................................................................................................16
AMENDMENTS TO THE GROUND RULES .........................................................................................................................16
SECTION 12 ...................................................................................................................................................................................17
PUBLICATION OF INFORMATION .......................................................................................................................................17
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 1
INTRODUCTION
This document sets out the Ground Rules for the construction and
management of the NSE 25 share index. Copies of the Ground Rules are
available from NSE website: www.nse.co.ke
The NSE 25 share index is designed to represent the performance of
the top 25 Kenyan companies listed on Nairobi Securities Exchange
providing investors with a comprehensive and complementary
benchmark to measure the performance of the Kenyan stock market.
The index is officially referred to as “The NSE 25 Share Index”
The index has been designed guided by industry best practice with a view
to provide opportunities to develop structured products based on
indices. As such the index represents a standard, transparent basis for
investors to assess measure and gain access to the Kenyan equity market.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 2
NSE RESPONSIBILITIES
The NSE shall be responsible for the operation of the Index by undertaking the following
tasks;
By maintaining records of the market capitalisation of all constituents and making
changes to the constituents and their weightings in accordance with the Ground
Rules.
By Maintaining constituent changes resulting from the semi-annual review, or as
otherwise required by this methodology.
By making changes to the constituent weightings in accordance with the Ground
Rules and keeping a record of all changes to constituent weightings.
NSE shall be responsible for monitoring the performance of the NSE 25 share Index
through-out the day and, determine whether its status should be Firm, Indicative,
Held or Part.
Recalculations
The index will be recalculated whenever inaccuracies or distortions occur that are
deemed to be significant. Users of the Index are notified through appropriate media.
Status of these Ground Rules
These Ground Rules set out the methodology and provide information about the
publication of the NSE Index Series
Amendments and exceptions to these Ground Rules
In the event that the NSE considers that an exception should be made to any of the
Ground Rules it will publish the change with adequate notice to the market.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 3
ELIGIBILITY CRITERIA
In order for a company to qualify for inclusion in the NSE 25 share Index, the
issuer shall fulfill the following conditions:
i). Shares must have their primary listing on the Nairobi Securities Exchange.
ii). Must have a least 20% of its shares quoted on the NSE.
iii). Must have been continuously quoted for a least 1 year.
iv). Must have a minimum market capitalization of Kes.1 billion
v). Should ideally be a “blue chip” superior profitability and dividend record.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 4
PERIODIC REVIEW OF CONSTITUENT COMPANIES
The Trading Committee which is the Index Management Committee meets semi-annually to
review the constituents of the index. The constituent reviews are based on data collected.
Details of the outcome of the review will be published after the NSE Board approval.
The periodic review of constituents will be conducted using the following steps:
i). Create database of all securities listed on the Nairobi Securities Exchange;
ii). Apply all liquidity tests set out in Ground Rules;
Weighting all the activity measures as set out in Ground Rules as follows; Market
capitalisation (40%), shares traded (30%) Number of Deals (20%) Turnover (10%)
iii). Exclude securities which do not fulfil criteria set out in Ground Rules;
iv). Rank all eligible securities by market capitalisation, largest first and smallest last;
v). Existing constituents which have fallen to position 26 or above will qualify to be
removed from the index at the periodic review; Where a greater number of securities
qualify to be included in the index than those qualifying to be removed, the lowest
ranking securities presently included in the index will be removed to ensure that the
number of securities remains constant. Likewise, where a greater number of securities
qualify to be removed from the index than those qualifying for inclusion, the highest
ranking securities which are presently not in the index will be included to match the
number of securities being removed at the periodic review.
vi). Adjust share weightings for availability to all investors.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 5
RESERVE LIST
The Nairobi Securities Exchange is responsible for publishing the five highest ranking
non-constituent securities of the Index following each semi-annual review. This
Reserve List will be used in the event that one or more constituent securities are
removed from the NSE 25 share Index during the period up to the next semi-annual
review of the Index.
Where a security is removed from the Index after the Index management Committee
has met and approved semi-annual changes to the Index but before the semi-annual
changes have been implemented, the highest ranking security by full market
capitalisation from the new Reserve List (excluding current Index constituents) will
replace the deleted security.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 6
CHANGES TO CONSTITUENT COMPANIES
Removal and Replacement
If a constituent is delisted, or ceases to have a firm quotation, or is subject to a
takeover offer which has been declared wholly unconditional or has, in the opinion of
the Index Management Committee, ceased to be a viable constituent as defined by
the Ground Rules, it will be removed from the list of constituents and replaced by the
reserve list security ranking highest by full market capitalisation as at close of business
on the day preceding the inclusion of the replacement security.
The removal and replacement are effected simultaneously, before the start of
business on the day following the day on which the event justifying removal was
announced. Announcement after close of business are normally deemed to be made
on the following business day. In the case of a takeover, the qualifying event is an
announcement that the offer has been declared wholly unconditional.
Mergers, Restructuring and Complex Takeovers
If the effect of a merger or takeover is that one constituent is absorbed by another
constituent the resulting company will remain a constituent of the Index, and a
vacancy will be created. This vacancy will be filled by selecting the highest ranking
security from the reserve list as at close of business on the day preceding the
inclusion on the replacement security.
If a constituent company is taken over by a non-constituent company, the original
constituent will be removed and replaced by the merged entity. In the event that the
merged entity is ineligible for the NSE 25 share Index, it will be replaced by the
highest ranking security from the reserve list as at close of business on the day
preceding the removal of the original constituent.
If a constituent company is split so as to form two or more companies, then the
resulting companies will be eligible for inclusion as index constituents if their market
capitalisation(s) are large enough to qualify, and if they qualify in all other respects.
The lowest ranking constituent of the index is removed.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
SECTION 7 Exchange
NEW ISSUES
If, in the view of the Index Management Committee, a new issue is so large that the
effectiveness of the index as a market indicator would be significantly and adversely
affected by its omission, the Advisory Committee may decide to include the new issue
as a constituent of the index at the earliest practicable opportunity. In such a case, the
timing of the inclusion of the new constituent will be at the discretion of the Index
Management Committee. The security which is the lowest ranking constituent of the
index in the sector where the new issue fits will be selected for removal.
New issues of companies which do not qualify for early entry but which meet the
criteria for eligible securities will be eligible for inclusion in the next review.
If the Index Management Committee decides to include a new issue as a constituent
security other than as part of the normal periodic review procedure, this decision
must be publicly announced at the earliest practicable time.
Suspension of Dealing
Where a suspension of a constituent lasts for more than 30 calendar days and in the
opinion of the Index Management Committee is unlikely to return to the market, it
will be deleted from the index. When a stock is otherwise removed following
suspension of its quote, the stock will be removed at its suspension price unless
otherwise decided by the Committee.
Treatment of relisting companies
Securities which were removed from the index, which on relisting are larger than the
smallest constituent of the index, shall be re-instated in the index at the closing price
on the date of re-listing and the lowest ranking constituent of the index will be
selected for removal. The addition and deletion of stocks occur simultaneously, such
that there are always 25 constituent companies.
Securities which on relisting are smaller than the smallest constituent of the index,
shall then be re-instated in the same index at the price at which they were removed
after the close of the index calculation on the trading day prior to relisting.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 8
CHANGES TO CONSTITUENT WEIGHTINGS
Adjustments to reflect a major change in the amount or structure of a constituent
company’s issued capital must be made before the start of business on the day on
which the change takes effect (e.g. the Ex-Date for a rights or capitalisation issue).
Adjustments to reflect less significant changes (e.g. the issue of an additional block of
shares under an employees’ equity scheme) would be implemented as soon as
possible following the announcement of the change.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 9
CORPORATE ACTIONS AND EVENTS
A ‘Corporate Action’ is an action on shareholders with a prescribed ex-date. The share price
will be subject to an adjustment on the ex-date. The index will be adjusted in line with the ex-
date.
These include the following:
1. Capital Repayments
2. Rights Issues/Entitlement Offers
3. Splits (sub-division) / Reverse splits (consolidation)
4. Scrip issues (Capitalisation or Bonus Issue)
Where an index adjustment is required NSE will provide notice advising of the timing of
the change.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 10
INDEX CALCULATION
Prices
The NSE Index uses the closing price (Volume Weighted Average Price of the
constituent securities to compute the NSE 25 Share Index.
Index Calculation
The NSE index will be displayed to two decimal points.
The NSE 25 share index will be calculated using the following formula:
𝑁(𝑝𝑖 × 𝑒𝑖 × 𝑠𝑖 × 𝑓𝑖 × 𝑐𝑖)
∑
𝑑
𝑖=1
Where,
I = 1, 2, … ,
N = is the number of securities in the Index.
pi = is the latest average price of the component security
(or the price at the close of the Index on the previous
day where there are no trades in a given session).
ei =is the exchange rate required to convert the security’s
currency into the Index’s base currency where
applicable otherwise remains as 1
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
si =is the number of shares in issue used for the security,
as defined in the Ground Rules.
fi =is the Investability Weighting Factor to be applied to a
security (This is the percentage free float for a specific
security)
ci =is the Capping Factor to be applied to a security which
is the market capitalisation of the respective securities
as compared to the total market capitalisation
d =the divisor, a figure that represents the total issued
share Capital of the Index at the base date. The divisor
can be adjusted to allow changes in the issued Share
Capital of individual securities to be made without
distorting the Index.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 11
AMENDMENTS TO THE GROUND RULES
Changes and exceptions to these Ground Rules can be authorised only by the Index
Management Committee. In the event that the Committee or any of those responsible
for the operation and administration of the index consider that an exception should
be made to any of the Ground Rules, the issue must be brought to the attention of
the Chairman (or their representatives), who will normally put the matter to the Index
Management Committee for a decision.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 12
PUBLICATION OF INFORMATION
The Nairobi Securities Exchange shall ensure that the following information on
the indices is widely published:
1. Index values
2. List of constituents
3. Changes to constituents
4. Changes and amendments to the Ground Rules
5. Details of any recalculations or calculation amendments.
Constituent prices, weightings and other stock data together with statistics on the
indices are available from the NSE Website. The daily index points will be published on
the Daily Equity Pricelist and the NSE Website before the close of business 1700hrs.
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
SECTION 13
CURRENT NSE 25 SHARE CONSTITUENT COMPANIES
No. CONSTITUENTS
ABSA Bank Kenya Plc Ord 0.50
1
Stanbic Holdings Plc ord.5.00
2
Diamond Trust Bank Kenya Ltd Ord 4.00
3
Equity Group Holdings Plc Ord 0.50
4
I&M Holdings Plc Ord 1.00
5
KCB Group Plc Ord 1.00
6
NCBA Group Plc Ord 5.00
7
Standard Chartered Bank Kenya Ltd Ord 5.00
8
The Co-operative Bank of Kenya Ltd Ord 1.00
9
Nation Media Group Plc Ord. 2.50
10
WPP Scangroup Plc Ord 1.00
11
Jubilee Holdings Ltd Ord 5.00
12
Bamburi Cement Ltd Ord 5.00
13
KenGen Co. Plc Ord. 2.50
14
Total Kenya Ltd Ord 5.00
15
Kenya Power & Lighting Co Plc Ord 2.50
16
Britam Holdings Plc Ord 0.10
17
CIC Insurance Group Ltd ord.1.00
18
Kenya Re Insurance Corporation Ltd Ord 2.50
19
Liberty Kenya Holdings Ltd Ord. 1.00
20
Centum Investment Co Plc Ord 0.50
21
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
No. CONSTITUENTS
Nairobi Securities Exchange Plc Ord 4.00
22
British American Tobacco Kenya Plc Ord 10.00
23
East African Breweries Ltd Ord 2.00
24
Safaricom Plc Ord 0.05
25
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
NSE 25 SHARE INDEX
Nairobi Securities
Exchange
Reviewed by
Signature Date
Approved by
Signature Date
NSE 25 Share Index Ground Rules for the Management of the NSE 25 Share Index
