Archive for the 'Automated trading system (ATS)' Category

London Stock Exchange financing African growth

African companies listed or trading on the London Stock Exchange have a total market capitalization of over $200 billion ($271bn), and in the last 10 years have raised more than $16 bn on London’s markets. The 108 African companies is more than any other international market, according to a press release from the LSE.

There are 9 African sovereign bonds listed in London, from: Gabon, Ghana, Namibia, Nigeria and Zambia

According to Tom Attenborough, Head of International Business Development, London Stock Exchange, in an LSE press release: “The success of Vivo Energy’s IPO is a strong statement of international investor interest in building exposure to Africa. As a London-listed company, Vivo Energy, will gain access to the world’s most international market, as well as an unrivalled source of deep liquidity and new investors.

“London is a strong partner to African companies seeking to attract international investment.”

Paternoster Square with London Stock Exchange at right (credit: Wikipedia)

  • Also this month, May 2018, Angola launched a $3bn Eurobond on LSE, the country’s biggest international bond and the first international issuance since 2015.
  • In April the LSE Group, the Nairobi Securities Exchange and non-governmental organization FSD Africa signed a memorandum of understanding to explore the launch of LSEG’s business support and capital-raising programme, ELITE. In May, the first Kenyan company, Olsuswa Energy, joined the programme. So far 850 companies have joined the ELITE programme.
  • In November 2017, the LSE, Casablanca Stock Exchange and the Bourse Régionale des Valeurs Mobilières (BRVM) signed an agreement to roll out ELITE across West African markets, in a signing ceremony presided by Amadou Gon Coulibaly, Prime Minister of Côte d’Ivoire.
  • In June 2017, Nigeria raised $300m through its first Diaspora Bond on LSE, a retail bond aimed at Nigeria’s global expatriate community seeking to invest in their home country’s development. It was the first bond of its kind from sub-Saharan Africa.
  • In March 2017, LSE published its first “Companies to Inspire Africa” report, identifying hundreds of the fastest-growing and most dynamic private businesses across Africa. Vivo Energy is the first company in that report to follow up by listing on LSE.
  • In March 2016, LSEG established an Africa Advisory Group, bringing together 12 distinguished business leaders, policymakers and investors from across Africa, to discuss the challenges and opportunities presented by the development of the continent’s capital markets.
  • In November 2014, London Stock Exchange Group and The Nigerian Stock Exchange signed a capital markets agreement to support African companies seeking dual listings in London and Lagos. The agreement followed the implementation earlier in 2014 of a unique new cross-border settlement process between the UK and Nigeria.
  • In June 2014, LSEG signed a strategic agreement with Casablanca Stock Exchange to share its expertise on the full exchange business chain, from listing to trading, and from clearing to settlement and custody with a commitment to position Casablanca’s capital markets and financial infrastructure as a regional hub.
  • In April 2014, Nigerian oil and gas group Seplat was the first Nigerian company to simultaneously dual list equity shares in London and Nigeria and raised $500m in an IPO.

LSEG market infrastructure technology, supplied by Millennium IT of Sri Lanka, is deployed in more 12 African markets, including Botswana, Casablanca, Namibia and Johannesburg stock exchanges.

Malawi Stock Exchange to start automated trading in May

Malawi Stock Exchange is set to go live with an automated trading system (ATS) and today (30 April) is start date for dematerialization as shareholders move physical certificates onto the Reserve Bank of Malawi electronic Central Securities Depository (CSD). Trading on the African stock exchange is to be automated by end of May.

Malawi Stock Exchange (photo credit: The Times Malawi)

According to the announcement by MSE and RBM: “Electronic trading is expected to commence by end of May 2018 and only securities that have been transferred and registered in the CSD will be traded in the ATS. Going forward, after implementation of the systems, all new IPOs (initial public offers) and subsequent trading will be made in the CSD and the ATS, respectively.

“The CSD is commencing the dematerialization process of the existing paper certificates and therefore requires that shareholders open investor accounts and dematerialize their securities (migrating from paper-based title to electronic securities) in preparation for the trading of electronic-based securities following implementation of the systems.

“Current shareholders are consequently required to contact a registered stock broker or custodian to dematerialize their stock holdings. Stock holders will be required to complete a Stock Holding Declaration and Consent to Dematerialize form upon presentation of the physical certificates; a signed and stamped copy of the form will be provided to the holder. The dematerialization process will run from 30th April, 2018 to 30th September, 2018.

“The investing public is encouraged to open securities accounts (in the same manner that one opens a bank account) through a registered custodian or stock broker from 30th April, 2018 onwards and deposit their share certificates in such accounts. We strongly encourage investors to deposit their securities early in order to minimize inconveniences that holders may face when need to trade arises instead of waiting for the deadline. Investors in regularly trading counters are particularly encouraged to speed up the dematerialisation of the securities.”

Capizar ATS system by InfoTech
The new system is Capizar ATS supplied by InfoTech Group of Pakistan in partnership with local firm Unified Technologies Ltd for infrastructure, also supplying hardware for MSE. Amir Raza Khan, VP & Head of Capital Markets BU at InfoTech, commented in a press announcement: “It is a privilege to work and represent Pakistan on an international platform. We are extremely proud of the expansion InfoTech has made in African markets especially in the SADC region. I would like to congratulate the Reserve Bank of Malawi and wish them success in this new era of automated trading and hope this new direction will influence a rise in aggregate turnover as well as volumes traded.”

The project is part of the $28.2 million Financial Sector Technical Assistance Project funded by a World Bank loan, with the total project set to close on 29 June. The tender was advertised by RBM in November 2016 and a procurement document published by the World Bank puts the CDS cost at $399,000 and the ATS at $723,708, plus links and other costs.

$1.9 bn pensions and insurance
MSE was created in 1994 and started offering secondary market trading in Government of Malawi securities. It started trading equity in November 1996 when it listed National Insurance Company Limited (NICO). It is licensed under the Financial Services Act 2010 and operates under the Securities Act 2010 and the Companies Act 2013. CEO is John Robson Kamanga.

At 30 April there were 3 stockbrokers, and listings were 13 stocks and 2 Government of Malawi bonds. The most recent main board listing was FMBcapital Holdings in September 2017, breaking a 9-year listings drought since Telekom Networks Malawi listed in November 2008. No companies have yet listed on the Alternative Capital Market designed for smaller and medium enterprises (SMEs) to raise capital. FMBCH is based in Mauritius and is holding company for FMBcapital group with banking and financial operations in Botswana, Malawi, Mozambique, Zambia and Zimbabwe.

Reserve Bank of Malawi (RBM) Governor, Dalitso Kabambe, said the stock market has a critical role to play in development, according to local newspaper The Times. He said firms are need capital for expansion to increase output, but also funds are growing rapidly outside the stock exchange, especially in pension and life insurance assets. “It is estimated that, by next year, 2018, the country will have a combined total of pension funds and life insurance funds to the tune of MWK1.4 trillion ($1.9 billion), against a total equity at the MSE of MWK762bn ($1.0bn).

“This, if not addressed by listing more companies on the MSE, will likely cause sub-optimal asset allocation, liquidity issues and an asset bubble. We have to avoid this at all costs, and the development of a stock market is a sure way of meeting the objective,” he said.

He was also quoted in a local newspaper The Nation that the new ATS and CSD would enhance confidence for local and international investors.

Computers quieter,faster than open outcry

Another floor of shouting traders has just closed in New York, after CME Group (named after Chicago Mercantile Exchange) closed its open outcry trading pits. The trading floor still continues in pits on various commodities in the Chicago building that houses the Chicago Board of Trade, in an approach that dates back to when the building opened in 1930, writes The Economist magazine this week.
The Chicago exchange only has 9 pits, down from 32 in 2007, and closed one trading floor in 2015 that used to be very crowded and busy. Like the rest of the hyperactive world securities and commodities markets that used to heave with life, emotion, despair, greed, fear, ambition, deception and many other human conditions, gradually the computers have taken over.
The magazine writes: “In the end it was not scandal or terrorism that undermined open outcry; it was efficiency. Computers turned out to be quicker, cheaper and more precise than humans”.
It notes that CME Group was quick to understand that most business was in interest rates, stockmarket indices and currencies, not in traditional commodities. It picked up good volumes and made economies of scale in trading and clearing and then bought up other exchanges that ran into problems. Volumes continue to climb and a tumultuous year of surprising votes in UK and US have seen a big spike in activity and volatility. It provided US and UK traders with a record December and record-breaking volumes on exchanges such as the CME.
The Chicago Board of Trade was formed in 1848 and moved in 1856 to make space for 122 new members.

Chicago Board of Trade building, the figure on top is the goddess Ceres (photo Wikipedia)

Sudan’s Khartoum Stock Exchange launches electronic trading system

Sudan’s Khartoum Stock Exchange inaugurated its electronic trading system on 24 March. The system is funded by the African Development Bank as part of its $34.8 million Public Financial and Macroeconomic Management (PFM) project. The bank says in a press release: “The e-trading system will be instrumental in promoting rapid development of the Khartoum Stock Exchange Market, which is a central element in the country’s financial market.”

According to a report on Sudan News Agency, Dr. Azhari Al-Tayib Al-Faki Director-General of KSE, said the launch was for the second phase of the trading system, financed by a $400,000 AfDB grant to cover system development and capacity building. He says it will reactive the market operations and allow remote access. He adds the update is by a company called FMH International and adds that it did a first phase of the project in 2012.

Abdul Kamara, Resident Representative of the AfDB in Sudan, said electronic trade is increasingly important. He stressed that the Bank’s support emanates from the considerable advantages of trading electronically, which reduces the risk associated with physical cash transactions, lowers transaction costs and saves time. He also noted the potential of e-trading to improve transparency, flow of information and enhance domestic resource mobilization, such as Sukuk bonds on which Sudan heavily depends on for financing infrastructure and service delivery. He assured the government of the Bank’s continued assistance in the area of public financial management and enhancing accountability in the use of public resources.

The market was previously open for 1 hour a day Sunday to Thursday. The KSE has 66 listed companies, including 25 banks, 8 insurance companies and 11 investment and development companies. The primary market was launched in 1994 and In 2012 a total of $113m worth of shares were issued. There was also primary market issues for each Government Musharaka Certificates (Shahama), Government Investment Funds (Sukuks) and investment fund sukuks, bringing the total value of primary market issues in 2012 to $1.08 billion.

Other parts of the PFM project aim to create a “platform for establishing electronic public financial systems, which will ultimately form basis for the transition of electronic governance and administration of public resources. Other complementary systems that are being developed by the PFM include an Integrated Financial Management and Information System (IFMIS). This will integrate Sudan’s public financial management systems with other systems in line ministries, through a customized IT infrastructure that will enhance electronic transactions, information flow and interaction across ministries,” according to the AfDB press release.

khartoumstockexchange_sudan-afdb-03-16

Cross-exchange trading between Ghana and Nigeria stock exchanges

A trade in July was one of the first examples of cross-border trading, where a broker in Ghana was able to buy shares on the Nigerian Stock Exchange through links with a Nigerian broker. It points the way for closer capital market integration in West Africa, where economic links are already strong.

According to this story on Bloomberg, the trade was executed by Ghana’s CAL Brokers Ltd and Nigeria’s United Capital Securities Ltd. CAL Brokers bought 100 Dangote Cement and 6,000 Guaranty Trust Bank shares from United Capital Securities. It bought the shares for its own portfolio to sell later, paying commission and money transfer costs.

“Investors can now tap into bigger pool of funds,” Geoffrey Maison, a research analyst at CAL, told Bloomberg in an interview. “Investors from Ghana can look out for opportunities on the Nigerian Stock Exchange or BRVM if they can’t get stocks to buy here.”

Wole Shonibare, Deputy Group CEO/ Managing Director, Investment Banking at United Capital PLC wrote: With signed memoranda of understanding (MOU) (recognized by each regulator in the two jurisdictions) in place, Ghana and Nigerian dealing members (broker-dealers) were able to trade among themselves via Sponsored Access. The first trade which was completed on 15 July 2015 was facilitated by the Nigeria Stock Exchange (NSE), in conjunction with the Ghana Stock Exchange (GSE) with the actual trade conducted by United Capital Securities. This first trade has successfully developed the framework for subsequent trades in the market.

More than 180 securities are listed on the Nigerian bourse, while Ghana Stock Exchange has 35 equities and the Bourse Régionale des Valeurs Mobilières SA or BRVM, a regional stock exchange bringing together eight countries from a base in Abidjan, Cote d’Ivoire, has 39 deals. Ghana and BRVM have been seeing lower trading volumes.

Four West African exchanges including the Sierra Leone stock exchange are busy with a staged integration process under the West African Capital Markets Integration Council (WACMIC), set up in January 2013 to harmonize the regulatory environment for issuing and trading securities and to develop a common platform for cross-border listing and trading. WACMIC is made up of Chief Executives of the regulators (securities commissions) and of the securities exchanges. Adu Anane Antwi, director general of Ghana’s Securities and Exchange Commission told Bloomberg the council had been working on rules and technicalities of cross market trade since 2012.

The current phase is.known as “sponsored access”. Maison said broker can ask a dealer in another country to execute trades on its behalf, Maison said. Previously, an investor wanting to buy equities in another country would have to go through an audit before opening an account with a broker.

Antwi said: “Even at this first stage if you’re interested in a Nigerian stock you don’t have to go to Nigeria to find a broker,” Antwi said. “You can buy the stock by talking to a broker here.”

Next step will be “direct access”. Traders will be able to execute transactions in other markets. The final is a common board to display prices across the 4 markets. This is facilitated as the exchanges have automatic trading and allow direct market access (DMA)

According to United Capital’s Shonibare: This landmark transaction is important and beneficial to West Africa and the African financial markets in many ways. Liberalizing capital transactions across any region is the first step for integrated capital markets. Over the years, African financial markets have been left vulnerable to volatility resulting from massive portfolio inflows from countries that share little economic similarities with the region, causing a significant bout of macroeconomic instability in the domestic financial markets. The Ghana-Nigeria deal is expected to be a precursor to greater capital flows within a sub-region that already operates a liberalized trade environment.

In the near term, market operators intending to participate in this laudable initiative would need to scale up their IT support for trading securities as transactions can only be done electronically while orders would require an order management system that is synchronized with the local Stock Exchange. There is need to provide information about investment opportunities across markets within the region as this will help boost inter-market dealings by investors and assist market operators increase their revenues. Stronger Settlement system is also important. Additionally, there is need for a more robust banking system across markets such that investors can make payments in local currencies where orders are originated irrespective of the market they are trading into as this will help increase the volume/value of trades. Finally, there is urgent need to pass the enabling laws that would allow electronic trading and direct market access to take place in the various exchanges within the region.

Namibia’s stockbrokers switch to IRESS to access NSX

namibiansx151007_Logo_NSX_Namibia
All 4 Namibian stockbrokers have switched their front-end links into the local bourse trading system to the trading solutions supplied by IRESS. The company is a leading supplier of innovative technology for financial markets, wealth management and the mortgage industry in South Africa, Asia, United Kingdom, Canada, New Zealand and Australia.

IRESS says that the fully integrated solution incorporates order and execution management means that brokers no longer have to use multiple and legacy trading systems when managing orders on the local Namibian Stock Exchange (NSX) and their institutional order flow to South African brokers for execution on the Johannesburg Stock Exchange (JSE). Order routing is fully managed by IRESS and delivered within a unified multi-market order-management system. Brokers can leverage IRESS’ international trading connectivity and seamlessly access counterparties on the IRESS network, which includes many “buy-side” or institutional investors. Efficiency benefits include unified systems and no need to enter data twice or more, removing the potential for human data entry error.

Ridwaan Kharva, Head of Trading Solutions at IRESS, explains in a press release: “Having an integrated order-management system and execution platform creates a huge amount of efficiency in terms of both cost and workflow. We are delighted to include all Namibian brokers as IRESS exchange trading clients in addition to our presence in South Africa. IRESS has been connecting market participants for over 10 years and brokers in Namibia will now be able to benefit from enhanced trading capability, delivering improved speed and reliability with reduced cost.”

IRESS has also supplied the NSX with IRESS Professional Market Data, enabling comprehensive market monitoring and analysis.

The NSX made history in 1998 when it became the first African exchange to run its trading systems on the system offered by the JSE under an agreement to exchange technology, skills and . That has ensured, over the years, that it has remained with one of the world’s best and most up-to-date trading systems, currently running out of Johannesburg and previously run by the London Stock Exchange. The arrangement was renewed in 2014, and details of its benefits are given in this JSE press release.

The NSX has 34 listed companies and 4 listed exchange-traded funds (ETFs), 4 stockbroking members and 7 sponsoring brokers.

IRESS, headquartered in Australia, employs over 1,340 staff globally, with local knowledge and industry experience. All its product streams support a diverse range of roles and offer front, middle and back-office functionality for clients that range from financial service institutions through to independent operators

Update 2 – Zimbabwe Stock Exchange automation successful

The Zimbabwe Stock Exchange (ZSE) started successfully trading on its new automated trading system (ATS) on Monday 6 July and volumes were picking up during the week. This is a long-awaited change as the stock exchange moved away from call over and paper-based systems.
ZSE CEO Alban Chirume and a couple of Zimbabwean stockbrokers confirmed to AfricanCapitalMarketsNews that was working well. Monday had started slowly, as expected, but once orders were being matched successfully and there were no problems, volumes seemed to up on Tuesday and today (8 July). Chirume described it as a “major transformation” for the ZSE, founded in 1896. Stockbrokers were upbeat, saying their clients local and international had been waiting for this.
There was a false start on 3 July, originally announced as the launch day, when the “close coupling” linkage between the ATS and the settlement system gave some teething problems. This was resolved by Monday and the settlement system seemed to be working well after that.
The news comes as a relief to brokers and dealers, who can now trade from their own offices and do not need to spend time travelling to the Zimbabwe Stock Exchange building. Earlier this year the ZSE had moved out of its city-centre office and into its own premises.
Chirume said the ZSE staff were cheering as the first trade went through.
The ATS is supplied by InfoTech Middle East LLC and the settlement is run by Chengetedzai Depository Company Ltd, which is using Depo/X system supplied by CMA Small Systems from Sweden to run the central securities depository (CSD). The only securities which can now be traded are those which have been dematerialized, which means that paper share certificates have been replaced by dematerialized entries on the CSD computer. However, all the ZSE shares are now dematerialized apart from Border, which is under judicial management.

UPDATE – Zimbabwe Stock Exchange delays automated trading

According to an announcement today, 3 July, the Zimbabwe Stock Exchange says it did not launch electronic trading today as planned and the launch has been delayed indefinitely. The ZSE says: “Erring on the side of caution, it was decided to resolve a technical issue to ensure a seamless completion of the settlement processes. Further updates on ‘go live’ will be issued by the ZSE in due course.”
The ZSE has been trading securities using “callover” sessions since 1896 and had announced yesterday it was ready to launch online trading today through a new automated trading system (“ATS”) installed by InfoTech. It says it had opted for a close coupling model between the ATS as the front end of the trading cycle and the central securities depository (“CSD”), which has a mandate for settlement of both scrip and cash.

Zimbabwe Stock Exchange launches electronic trading 3 July

Electronic share trading is due to go live today, 3 July, at the Zimbabwe Stock Exchange (ZSE) with new trading hours for the exchange. According to an announcement yesterday all registered stockbrokers meet the requirements and will be able to provide uninterrupted services and the new platform trades only the securities that are dematerialized at the central securities depository (CSD) Chengetedzai Depository Company.

The new automated trading system (ATS) has been supplied by InfoTech, an IT firm headquartered in Singapore with offices in Pakistan, United Arab Emirates and Ghana. It replaces the call-over through which stockbrokers traded shares in Zimbabwe since the bourse was established in 1896 including stockbrokers gathering in a room once or twice a day to discuss trades on a list of securities.

According to the ZSE announcement: “The new electronic platform enables participants to conduct their business from various locations by accessing the ZSE through the Internet. The ATS operates on agreed rules which are in-built in the system and therefore guarantees adherence to price and time priority principles in the interest of market fairness and transparency”.
zimbabwese50502_tradingboard
Newsletter ATS Watch published on 2 July says the ATS hardware was installed in May 2015 including servers and disaster recovery servers. It has “close coupling” links to the CSD: “Given the need to ensure real time exchange of information, the ZSE opted for close coupling and the vendors of both the CSD and the ATS worked for at least six months to ensure that the interface for close coupling was provided.”

Training ran from 8-26 June, led by Ejaz Anwar (Project Leader), Dilshard Ahmad and Muhammad Asghar from InfoTech. Martin Matanda, Operations Executive of the ZSE, is also the project manager leading a team of consultants and IT staff. Training was given to staff of ZSE, the Securities and Exchange Commission of Zimbabwe and the CSD and there was separate training for all other market participants, mainly stockbrokers. Trainees learned how to enter orders and generate reports. Participants also talked to the system vendors and this led to refinements being made to the system to ensure that it is fully customized to the Zimbabwe capital market. Mock trading has also been held.

Other key changes in trading include:
1. New trading times (local time): Monday to Friday (except public holidays)
Continuous Session – 10:00 am to 12:30pm; Market closes – 12:30pm
2. Continuous trading during open sessions, which means multiple prices could be established and traders will have more flexibility
3. The ATS can only trade dematerialized securities that are loaded at the CSD via Chnegtedzai’s Depo/X facilities
4. Algorithms will discover the prices, so that an order can be filled at different prices depending on the book
5. Circuit breakers on price with lower and upper price limits (percentage) for each counter on the ATS, based on the previous closing price. These limits can be set for all counters or for each counter
6. Real-time data throughout the “open” phase, accessible to market participants and other stakeholders for a fee

New listing
Manufacturing and construction Masimba Holdings on 8 June separately listed its plastics manufacturing subsidiary, Proplastics, on the ZSE through a dividend-in-specie, according to a news report. It is the second listing on the ZSE in 5 years after Padenga Holdings which also listed through a dividend-in-specie following its unbundling from Innscor Africa in 2010. The last initial public offering (IPO) of shares was Zeco Holdings in 2007.

The latest listing of 60,000 shares at 3c follows a successful restructuring exercise by listed Masimba that resulted in the group unbundling the plastics manufacturing from the construction business. The aim is for both entities to attract capital and strategically position themselves in line with their core business, to unlock shareholder value and Proplastics focus on it business.