African markets

East Africa: Regional Stock Markets Automate Trading

Four East African countries – Rwanda (CSR), Uganda (USE), Tanzania (DSE)and Burundi – finally merged their stock markets through a decade-long automation project to attract investment.

The automation means that investors will now be allowed to trade their shares electronically across borders next month, according to Celestin Rwabukumba, managing director of the Rwanda Stock Exchange.

This is a project that has been in the making since 2011 when the countries of the region embarked on the integration of their stock exchanges while at one time Rwanda was only beginning to invest in its capital market.

The World Bank-funded project was completed with only a few states for the technology system to go live, according to Rwabukumba, who is also chairman of the East Africa Securities Exchange Association (EASEA).

“It used to be that you traded your KCB shares in our market, you had to take a bus, get your share certificate from Kenya and bring it to Rwanda or send it by DHL,” he said. declared.

It was inefficient and expensive.

“Today is going to happen in the blink of an eye. The system will allow you to open an account in all markets, strengthen access to an investment pool and give you visibility,” he noted.

Through the platform, investors from the four countries will be able to buy and sell shares of companies listed in any of the countries without going through different stakeholders.

Kenya reportedly withdrew from the project in 2015 due to alleged procurement irregularities, but Rwabukumba said he had “formally expressed interest” in rejoining.

Kenya currently has the largest and most active capital market in the region.

The Nairobi Stock Exchange comprises approximately 66 listed companies with a daily trading volume of over $10 million and a total market capitalization of over $20 billion.

The Rwanda Stock Exchange, on the other hand, has a market capitalization of just $3.5 billion, but the region’s move is expected to diversify markets such as Rwanda’s and create a large pool of retail and institutional investors.

George Odhiambo, Managing Director of KCB Bank Rwanda, which is part of the KCB Group whose shares are listed in both Kenya and Rwanda, said automation would likely bring many benefits in promoting the capital market.

“Any automation should reduce transaction costs, improve operational efficiency and speed up deal closing for the benefit of stakeholders,” he told The New Times on Thursday.

The platform

The technology platform dubbed EAC Capital Markets Infrastructure (CMI), developed by a private company based in Pakistan, will essentially interconnect all trading systems in the region.

It has features like Smart Order Router, which will allow stock brokers to view all markets and market information in the region, and Messaging function which will allow market participants to communicate.

However, in order for stockbrokers to trade, they will need to meet certain conditions, including minimum capital requirements. For example, a regional broker licensed to trade across the region would need to be capitalized at Rwf240 million.

Alternatively, for brokers to trade, they would need to have a “sponsored membership” in a local market where they wish to buy shares.

“This means you will need to sign an agreement with a broker in Dar es Salaam through which you can execute trades. Indeed, stock markets are still governed by host market regulations,” he noted.

Rwanda, which seeks to leverage the integration project to promote its capital market, officially launched its stock exchange in 2011.

Other members of the region have had their stock exchanges for many years, with the exception of Burundi which has not yet created one.

The common stock market in East Africa follows the steps of a similar regional effort in West Africa where the Bourse Régionale des Valeurs Mobilières already exists.

The Abidjan-based electronic stock exchange which lists 45 companies is common to all eight member states of the West African Economic and Monetary Union – Benin, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.

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