Investing in shares is one of the most practical ways to grow your wealth and take part in Kenya’s economic success. When you buy shares, you become a part-owner of a company and can earn from its growth through dividends and price increases over time. The Nairobi Securities Exchange (NSE) provides the main platform where individuals can buy and sell these shares, but before you can trade, you must first open a Central Depository System (CDS) account.
The central depositor system (CDS) account acts as your electronic holding locker. Instead of keeping paper certificates, your shares are held digitally, making the process faster, safer, and easier to track. The account records the ownership of your securities, manages dividends and corporate actions, and connects you to licensed stockbrokers who execute your trades on the exchange. It’s the secure bridge between you and the market.
This article will guide you step by step through the entire process of opening a CDS account, explain what a Central Depository System account is and what a Central Depository Agent is, and outline the importance of opening a Central Depository account and the fees you will incur throughout the process.
Understanding the CDS Account
A Central Depository System (CDS) account is a digital account that keeps records of your investments, such as shares and bonds, in electronic form. It is opened and managed through a licensed Central Depository Agent (CDA), usually a stockbroker, investment bank, or commercial bank, on behalf of the investor as per Hukukenya (2025)
Before electronic systems were introduced, investors received paper share certificates to prove ownership. This method was slow, risky, and prone to loss or damage. The CDS system replaced that with a safer, paperless platform where all your investments are recorded automatically.
With a CDS account, buying and selling shares becomes faster and more efficient. It also simplifies the process of receiving dividends, handling corporate actions such as bonus issues or rights offers, and maintaining accurate ownership records. The CDS account is the foundation of modern investing in Kenya. It is the essential first step before you can trade on the Nairobi Securities Exchange.
Central Depository Agent (CDA)
As an investor, you are not eligible to open a Central Depository account as per the rules and regulations because you are not licensed by the Central Depository and Settlement Corporation. You need a central depository agent. A Central Depository Agent (CDA) is a financial institution, usually a licensed stockbroker, investment bank, or custodian bank, authorized by the Central Depository and Settlement Corporation (CDSC) to open and maintain CDS accounts for investors. A CDA serves as the official, licensed intermediary that connects investors to the electronic system responsible for recording ownership of shares, bonds, and other securities in Kenya. The following institutions act as central depository agents as provided by the Capital Market Authority.
- Licensed stockbrokers/brokerage firms — these are the main choice for individual investors. They help you open a CDS account, execute buy and sell orders on the Nairobi Securities Exchange, and provide market updates.
- Large investors and corporate clients mainly use investment banks. They offer CDS account services along with investment advisory and portfolio management. It’s ideal for those investors who need more strategic financial guidance.
- Commercial banks with depository services – Some banks are authorized to open and manage CDS accounts. They serve institutions, pension funds, and investors who prefer to combine banking and investment services in one place for convenience and security.
CDS Account Types
When opening a CDS account, you can choose from several types depending on who will own and operate it. The following are the main types of accounts you can open, according to KenyaPedia (2024).
- Individual Account- This is the most common type and is opened by one person for personal investing in shares, bonds, or other securities.
- Joint Account- Opened by two people, often spouses, relatives, or business partners, who want to manage investments together.
- Corporate Account- Designed for registered companies, SACCOs, or investment clubs that wish to invest as a group or organization.
- Minor Account- Opened by a parent or legal guardian on behalf of a child under 18 years old. Supporting documents such as the guardian’s ID and the child’s birth certificate are required.
Why You Need a CDS Account Before Buying Shares
A CDS account is a mandatory requirement for anyone who wants to invest in Kenya’s capital markets. It acts as your official identification and record within the trading system, ensuring that all your transactions are appropriately tracked and settled. Without it, you cannot buy, sell, or hold shares and bonds in your name.
- Trading shares on the Nairobi Securities Exchange (NSE)-You cannot buy or sell shares on the NSE without a CDS account. The account allows your broker to record, transfer, and settle share transactions electronically in your name. It ensures that every trade you make is officially captured and recognized by the market.
- Participating in IPOs and rights issues — When companies offer new shares to the public through Initial Public Offerings (IPOs) or rights issues, investors must use a CDS account to apply. This guarantees that any shares you buy are credited directly to your account once the offer is completed.
- Receiving dividends electronically-Companies listed on the NSE pay dividends to shareholders through the CDS system. With your account linked to your bank, you receive your earnings automatically and securely, without dealing with paper cheques or manual claims.
- Holding government and corporate securities- Beyond company shares, a CDS account also allows you to hold government treasury bonds, bills, and some corporate bonds. These instruments are traded and settled electronically, just like shares.
Requirements for an Individual to Open a CDS Account
1. Valid Kenyan National ID or Passport
This serves as your official identification document. It verifies your identity and nationality before your account can be registered in the CDS system.
2. KRA PIN Certificate
Your Kenya Revenue Authority (KRA) PIN links your investment activities to your tax records. It’s mandatory for all investors and helps ensure compliance with tax regulations on dividends and capital gains.
3. Two Recent Passport-Size Photos (Certified by Your Bank)
You’ll need two color passport photos, usually stamped or signed by your bank to confirm authenticity. These are attached to your account-opening form for verification.
4. Proof of Address
A recent utility bill, tenancy agreement, or bank statement showing your name and address helps confirm your place of residence — a requirement for regulatory and security purposes.
5. Completed CDS 1 Form
This is the official application form provided by your Central Depository Agent (CDA) or the Central Bank of Kenya (CBK) if you’re opening a government securities account. It captures your personal and contact details, as well as your bank information for transactions.
6. Bank Account Details
You must provide your active bank account details to receive dividends, interest, or proceeds from sold securities directly and securely.
7. Email Indemnity Form (For CBK Accounts)
Suppose you’re opening a CDS account with the Central Bank of Kenya to invest in Treasury Bills or Bonds. In that case, you’ll fill out this form to authorize email communication and instructions. It ensures smooth digital correspondence with CBK.
Read Also: How to Register a Sole Proprietorship Business in Kenya
Step-by-Step Guide to Opening a CDS Account
Opening a CDS account in Kenya is simple and affordable, and you can do it through an approved stockbroker, investment bank, or commercial bank. Once your account is active, you’ll be ready to trade shares, government bonds, and other securities from your phone or computer. Here’s a step-by-step guide to opening an individual account, per HukuKenya (2025).
Step 1: Choose a Central Depository Agent (CDA)
A CDA is an organization licensed to help investors open and manage CDS accounts. These include stockbrokers and investment banks such as AIB-AXYS, NCBA Investment Bank, Faida Investment Bank, and Genghis Capital. You can easily find licensed agents on the Capital Market Authority website. When choosing a CDA, consider their reputation, customer service, trading fees, and the quality of their online trading platforms. Most CDAs allow you to open an account either in person or online through their websites.
Step 2: Submit the Required Documents
To verify your identity, you’ll need to provide the following documents: a valid Kenyan National ID or Passport; your KRA PIN certificate; two recent passport-size photos (certified by your bank); and proof of address, such as a utility bill or bank statement. These documents are used to comply with regulatory requirements and ensure the security of your account.
Step 3: Fill Out the CDS 1 Form
Once your documents are ready, your CDA will give you a CDS 1 Form to fill out. This form captures your personal details, contact information, and bank account details — where dividends and other payments will be sent. Make sure all the information you provide is accurate and matches the information on your official documents to avoid delays in the approval process.
Step 4: Receive Your CDS Account Number
After submitting your form and documents, your CDA will process your application. In most cases, this takes 1 to 3 business days. Once approved, you’ll receive your CDS account number. This is a unique identifier that allows you to buy, sell, and hold shares electronically. It acts as your personal ID in the stock market system.
Step 5: Start Trading
With your CDS account ready, you can now start trading! Your CDA will provide access to their online trading platform or mobile app, where you can view available shares, place buy or sell orders, and track market prices in real time. Before making your first trade, take time to understand how the stock market works, compare different companies, and start with small investments as you build your confidence.
How to Fund Your Trading Activity
Before you can buy shares, you need to fund your trading account. This is the account you’ll use to place and settle orders through your broker. This step ensures that money is available when you want to purchase shares or participate in new investment opportunities. A study by FXPesa (2025) highlights the following funding options for your account.
- Bank Transfers
Most brokers provide designated client bank accounts where you can transfer funds directly. This is one of the safest and most common methods for funding trading activity. Always confirm the correct account details from your broker and include your name or trading account number as the payment reference to avoid delays.
- Mobile Money Transfers
Many brokers now accept M-Pesa and other mobile money services as quick, accessible funding options. It’s ideal for retail investors who prefer convenience and instant transactions.
- Cheques and Deposit Slips
Some traditional brokers still accept cheque payments or manual bank deposits using deposit slips. While this method is less common today, it may be preferred by investors who handle large transactions or operate through physical branches.
- Third-Party Integrations on Online Platforms
Modern online trading platforms often integrate secure payment gateways, allowing you to move funds directly from your bank or mobile wallet to your trading account. These digital integrations make funding faster and more seamless for investors managing their portfolios online.
Read Also: Shares Investment in Kenya: Everything You Need to Know
Costs and Fees You Should Expect
Investing in shares involves several charges that cover brokerage services, regulatory compliance, and transaction processing. Understanding these costs helps you plan your investments better and avoid surprises when trading.
1. Brokerage Commission.
This is the main fee you pay your broker to execute buy or sell orders on your behalf. It can be charged as a percentage of the trade value or as a flat rate per transaction. Rates vary from one broker to another, so it’s wise to compare costs before opening an account.
2. NSE Transaction Levy.
The Nairobi Securities Exchange (NSE) applies a small regulatory fee on every trade conducted on the exchange. This levy helps maintain market infrastructure and supports oversight of trading activities. It’s automatically included in your trade cost.
3. CDS Maintenance Fees.
Some Central Depository Agents (CDAs) may charge small maintenance or annual fees for managing your CDS account. These charges cover account administration, record-keeping, and reporting services. Always confirm with your broker or CDA whether such fees apply.
4. Stamp Duty and Other Statutory Levies.
Certain transactions, such as share transfers or the issuance of new securities, may attract stamp duty or other statutory charges. These fees are regulated by law and typically apply in specific cases, not on regular market trades.
5. Bank Charges.
Suppose you fund your trading account or receive dividends through a bank. In that case, you may incur bank transfer charges, currency conversion fees, or mobile money transaction costs. These depend on your chosen payment method and financial institution.
Conclusion
Opening a CDS account and investing in shares in Kenya is a straightforward, step-by-step process that empowers individuals to take part in the country’s growing financial markets. To open a CDS account, one must have a valid Identity card, passport, KRA PIN, proof of address, bank account details, and a completed CDS 1 form. Once all the documents required are available, you will then need to look for a Central depository agent who will help you in the process of opening your CDS account. Once you fully set up your account, you will enjoy advantages such as receiving your dividends electronically, participating in IPOs and rights issues, trading shares on the Nairobi Securities Exchange, and trading government securities. This whole process of opening the account and executing your first trade will incur some costs, which it’s prudent to understand. These include bank charges, brokerage fees, NSE transaction levy, CDS maintenance fees, and stamp duty. Getting a central depository account is straightforward, as explained in this article. Open your account now and start investing today.
