Archive for the 'Central Depository' Category
July 3rd, 2015 by Tom Minney
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.
July 3rd, 2015 by Tom Minney
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”.
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
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.
May 4th, 2015 by Tom Minney
Chengetedzai Depository Company Ltd, Zimbabwe’s central securities depository (CSD), was reported that the last securities had been brought on board in March 2015, according to a report in Zimbabwe Mail. Old Mutual announced that its shares were also dematerialized with effect from 30 March.
CDCL announced last year that it had received due approvals to start operations and it went live in September 2014 with 3 securities onboard, and had extended that to 43 counters by January 2015.
CDCL had been publishing announcements as new shares are brought on board, and latest additions were Mashonaland Holdings, Old Mutual, Dawn Properties and others. There are some delays in the automation of Zimbabwe Stock Exchange trading system which is supposed to link to the CSD.
A CSD keeps a computerized register of securities ownership and also registers transfers after shares have been bought, sold or otherwise transferred. It replaces paper share certificates for most shareholders, in a process known as “dematerialization”. It links to systems for payment and clearance of trades.
The previous system saw clearing and settlement done between the stockbrokers on a T+7 schedule, Chengetedzai says it reduces settlement this to T+5.
Apparently local retail customers initially found it hard to understand that they must address settlement queries to a custodian, not to their stockbrokers as previously. Campbell Musiwa, Chengetedzai Depository Company chief executive said that CBZ Custodial Services had been set up as an “affordable” custodian for retail customers.
NewsDay reported in January that investors and stockbrokers were still breaking regulations by selling shares before dematerialization is complete. It added that only 1,557 accounts had been opened at Chengetedzai, of which 61% are for foreigners who work through global custodians (usually banks) who then relate to local custodians. Chengetedzai has been criticized for not doing enough to educate local shareholders to switch although it has worked with media and produced pamphlets.
Musiwa said there had been some delays in trade settlements if investors had traded before meeting the requirements but also: “There has been a marked improvement which resulted from continuous lobbying with market players to observe the rules,” he said
In April 2014 Chengetedzai Depository Company Ltd was reported by Standard Newspaper saying it was still waiting for licensing and for the award of a CSD levy by SECZ. Chengetedzai Depository Company won the tender to introduce the CSD in 2009 as reported on AfricanCapitalMarketsNews. After a shareholding dispute, it installed core software for operations that were planned for September 2013 but was held up while waiting for the licence.
In 2013, Chengetedzai raised nearly $2.5m through share issues, according to its annual report, including a successful $1.5m rights issue to finance the roll out of the CSD. The ZSE has invested $643,000 including $287,000 in the rights issue, according to its 2013 annual report, and holds a 15% stake after scaling up from 12.93% in January 2014. Chengetedzai’s 2013 annual report says that “quasi-government financial institutions” owned 56% and private investors 44%. Main shareholders were Infrastructure Development Bank of Zimbabwe, First Transfer Secretaries and ZB Financial Holdings with 15% each and the National Social Security Authority with 13% at 31 Dec 2013.
The software is Depo/X system supplied by CMA Small Systems ab of Sweden.
January 5th, 2015 by Tom Minney
Rwanda Stock Exchange (RSE) says it is getting closer to introducing an Automated Trading System using trading technology from Nasdaq OMX. It will also link its trading infrastructure to the Central Securities Depository (CSD) and Real Time Gross Settlement System (RTGS) at the National Bank of Rwanda.
In March 2014, there was a report in The East African that the RSE was aiming to use the Nasdaq X-stream system installed at the East African Exchange (EAX) regional commodity market. The latest news from the East African Securities Exchanges Association EASEA press communiqué (available here) from the 24th meeting in Rwanda on 26-27 November was: “The RSE is in the final stages of automation of its trading system”.
Nasdaq describes X-stream as “a flexible, out-of-the-box solution trading multiple asset classes simultaneously on a single platform” on its website. It says X-stream is “the world’s most widely deployed matching technology” among market operators and is deployed in over 30 exchanges globally.
According to the March story in The East African: “John Rwangombwa, the governor of the National Bank of Rwanda, told Rwanda Today that though electronic trading had been delayed due to the heavy financial outlay required, RSE and EAX are now in advanced stages of sharing the NASDAQ system. .. We have been working on our side as a central bank to link the central securities depository. In the course of this year —in three or four months — automatic trading will be up and running.”
The report added: “While trade volumes on the RSE have been steadily increasing, its current manual trading platform makes it uncompetitive in particular among offshore investors.”
The RSE also reported that the bond market is becoming more “vibrant”, with quarterly issues by the Government of Rwanda. This was after work by a team made up of Capital Market Authority (CMA), Rwanda Stock Exchange (RSE), Central Bank of Rwanda and the Ministry of Finance and Economic Planning.
East African Exchange
The EAX was launched on 3 July 2014 by His Excellency President Uhuru Kenyatta of Kenya. It had been established by Tony O. Elumelu, CON, of Heirs Holdings, Nicolas Berggruen of Berggruen Holdings, Dr. Jendayi Frazer of 50 Ventures and Rwandan investment company Ngali Holdings. Acccording to a press release: “the EAX is a commodity exchange that aims to increase regional market efficiency and give the growing population, particularly smallholder farmers, better access to commercial markets.
“EAX will use NASDAQ’s OMX X-Stream trading platform for electronic trading and warehouse receipts so farmers can deposit their produce into EAX certified warehouses and access its services.
“At the formal launch, Mr. Elumelu said: ‘The EAX showcases our desire to identify far reaching investment opportunities, while ensuring that most of the value-adding aspects of Africa’s resource wealth stay on our continent. Africa must move toward greater self-sufficiency with private investment and strategic partnerships, just as we have done at EAX through our partnership with NASDAQ.’
“Nicolas Berggruen said: ‘EAX is complementing the EAC’s goal of regional economic integration, and putting in place a world-class exchange to create a globally competitive market for Africa’s commodities.’ EAX’s goal is to facilitate trade across all five East African Community member states. EAX is wholly owned by Africa Exchange Holdings, Ltd. (AFEX). EAX in Rwanda is additionally owned by local investment company Ngali Holdings.”
According to an earlier story on AFEX and its plans in Nigeria, Jendayi Frazer was key in U.S.-Africa policy for nearly 10 years and U.S. Assistant Secretary of State for African Affairs (2005-2009). Nicholas Berggruen has a charitable trust which funds the investment arm to take “a long-term, patient capital value-oriented approach”.
A story written in New York Times in March 2014 described “A commodity exchange, with its dozen terminals and state-of-the-art software provided by Nasdaq, held its first six auctions over the past year — a fledgling venture, but the kind that helps explain how a nation with no oil, natural gas or other major natural resources has managed to grow at such a rapid clip in recent years.
Rwanda Stock Exchange trading boards (2013 – credit The East African/umuseke.rw).
For 2104 photos of the Rwanda Stock Exchange and the East African Exchange see the New York Times website here.
October 10th, 2014 by Tom Minney
The Nairobi Securities Exchange (www.nse.co.ke) is trading corporate bonds and Government of Kenya treasury bonds on an automated trading system. It marks another step forward for South Africa’s financial software development company Securities Trading & Technology Pty (STT), which also supplies the STT bond trading system used by the Johannesburg Stock Exchange (JSE), Africa’s most liquid bond market.
The new system allows on-line trading of debt securities and is integrated with the settlement system at the Central Bank of Kenya (CBK) for treasury bonds. It offers true delivery-versus-payment (DVP) to mitigate risk. In August 2014 the NSE increased the number of settlements in treasury bonds to 3 per day, with settlements at 11:00, 13:00 and 15:00 each day so that a bond trader can buy a Kenyan treasury bond and sell it the same day.
The new STT automated trading system (ATS) also is efficient, scalable and flexible, and supports trading in bonds that have been issued in different currencies.
Peter Mwangi, CEO of the Nairobi bourse, said in a press release: “This is a significant step towards the exchange’s goal of ensuring that the secondary market becomes more transparent and the price-discovery mechanism is beyond reproach.
“The multicurrency trading functionality of the new system means that foreign-denominated bonds can now be listed and traded on the NSE. With this development, we look forward to the listing of the Government of Kenya Sovereign Bond at the exchange.” He was referring to Kenya’s debut $2bn Eurobond that was successfully floated on the Irish Stock Exchange in June after attracting bids for 4 times the initial target.
Nairobi’s stock market was reported to be working with the Central Depository and Settlement Corporation (CDSC) and the CBK for settlements of corporate bonds.
It also follows the South African practice and allows reporting of bond prices by yield (i.e. the current interest rate to investors). According to an earlier report in Standard Media, Mr Mwangi said: “the bond trading system.. will allow reporting of bond prices by yield… Decision-making will be faster and this should spur further liquidity in the bond market.”
The STT system supports market-making, a 2-way-quote trading model, ability to integrate with regulators’ surveillance systems and ability to report transactions that are concluded over-the-counter (OTC) for purposes of settlement.
In enhancing the bond trading system, the Nairobi Securities Exchange acknowledges the vital role that a vibrant secondary market for active African bond trading continues to play in raising long-term capital for the Government and corporate entities. County governments can also use the same system to raise capital through issuing and listing county bonds.
Ms. Michelle Janke, Managing Director of Securities Trading & Technology said: “I am delighted to have partnered with the NSE, all teams have put in an enormous effort to take the market live”. The market went live on 26 September.
The Dar es Salaam Stock Exchange went live using the STT system on 27 June, as reported on this blog, after switching from Millennium IT system.
September 1st, 2014 by Tom Minney
Electronic trading is coming to the Zimbabwe Stock Exchange in terms of a contract signed recently with InfoTech Group of Pakistan. Meanwhile the central depository Chengetedzai Depository Company Ltd said that 3 listed companies – CBZ Holdings, Cottco Holdings and FBC Holdings – would be moved onto electronic registers from 8 September, according to local media reports.
The InfoTech Capizar software is also installed at Ghana Stock Exchange since 2008.
According to reports in the Pakistan Observer and The Nation in June, the contract with ZSE is a turnkey deployment of the automated trading system (ATS). According to a press statement by the ZSE in March, the contract was signed on 19 Mar for for the supply and installation of the Capizar ATS product by Infotech Middle East FZ LLC.
Trading floor at the Zimbabwe SE (photo from www.4vf.net)
The agreement was signed between Alban Chirume, CEO of the ZSE, and Naseer A Akhtar, CEO & Chairman of InfoTech Group, assisted by Murad Baig, VP Business Development at IFTL-London. According to the reports, the project was expected to start soon and to be finished within 6 months (by December). The ATS replaces the current manual trading system, which uses MS Excel and other packages to create and publish data, which the new system also does.
The ZSE statement in March adds: “On 31 Jul 2013 we announced the appointment of Central Depository Settlement Company of Mauritius (CDSM Ltd) as our consultant to the automation project. The consultants have since successfully guided us through the tender and vendor selection processes.
“The immediate next steps are the study of the local environment, and the gap analysis to be carried out by the Vendor in order for us to finalise the project plans. These limited activities will be followed by the procurement of computer hardware and construction of the data centre itself. We are expecting that in 3 to 4 months’ time, the project will be in the training and acceptance testing stages with the final live date being our target within a period of 6 months from now.”
CSD going live
Chengetedzai was approved by the Securities and Exchange Commission of Zimbabwe to run a CSD, after winning a competitive tender on 27 Dec 2010. According to a recent news report in The Herald and the Chronicle newspapers, its market update statement said: “Chengetedzai Depository Company Limited would like to advise all capital markets players, issuers of securities and the investing public that the necessary regulatory approvals to commence the Central Securities Depository (CSD) operations has been granted.
“In this regard, CDCL is ready to commence the opening of investor accounts and dematerialisation (migration from paper based title to electronic securities) of approved securities, in preparation for the trading of electronic based securities.” The company urged the investing public to open securities accounts through registered custodians, who include banks, from 25 August and deposit their securities in the accounts.
According to its website, Chengetedzai won the tender in which two bidders were invited to submit proposals after an initial expression of interest round in Apr 2010. This is in terms of the Securities Act 17/2004, which established the legal basis for the Securities Commission, its mandate and the establishment of a central securities depository (CSD) to maintain securities deposits in electronic form. The SECZ was only established in 2008 and the commissioners immediately embarked on setting up a CSD.
The Ministry of Finance put a hold on the project in Feb 2011 and announced in Aug: “The CSD project was deemed by Government to be of national interest and thus Government would take 51% shareholding in Chengetedzai and that only one CSD to be set up in the country. The ZSE would also be included as a shareholder in Chengetedzai. Then followed protracted negotiations between Chengetedzai to value the “sweat equity” and this was settled on 13 June 2012 by Government and SECZ, and the Shareholders’ Agreement was signed on 26 Jun 2012, after which a new board of directors began.
According to the CDCL report: “The first task was to confirm the software to support the CSD operations and a system selection process was kicked off immediately. After visits to South Africa, India and Moscow, the decision was made to select the Depo/X system supplied by CMA Small Systems from Sweden. The purchase and implementation contracts were signed in March 2013 and in April 2013 the implementation of the project started, exactly fourteen months after the tender was awarded.”
Check this amazing profile in Daily News of 23-year-old Samuelle Dimairho who has been dreaming of transforming the ZSE (and trading on it) since he was 15 and is the driving force behind Chengetedzai.
Background on the ATS
The Africa Report magazine wrote in Jan that the contract is expected to cost $2 million and says daily turnover on the exchange was currently $1.5m on average and there were 68 listed companies, down from a peak of 83. According to the report: “Apart from enabling longer trading hours, the ATS would reduce the fraudulent sale of non-existent stocks. The automation of the bourse has been on the agenda since 2000 although plans have stalled due to liquidity constraints. However, as the new system comes on board, more companies are set to delist this year due to the harsh economic environment obtaining in the country.” It cites Chirume saying: “Tentatively, there are companies which have already shown that they might merge and there is a possibility of some de-listings.” He believed that the de-listings would not have any implications on the bourse as some of the affected counters were not trading.
According to the ZSE press release in Jan, 11 vendors expressed interest, and 4 submitted full responses. They were:
1. A consortium of local vendors led by Chartered Systems Integration in partnership with CMA Small Systems of Sweden.
2. A consortium of Infotech Middle East FZ-LLC and local suppliers.
1. National Stock Exchange of India in partnership with Valentine software of Zimbabwe.
2. New York Stock Exchange Euronext Technologies.
“The initial valuation of all bids submitted narrowed down the competing vendors to a short list of 2 – CIS/ CMA Small systems and Infotech Middle East. During the last week of November the shortlisted 2 vendors were given the opportunity to give oral presentations and demos to support their bids. The CSI /CMA Small Systems consortium was however unable to participate in the demo exercises due to other circumstances beyond their control. Additional due diligence measures were taken during the month of December and as a result of the report outcome of these efforts the Board of the Zimbabwe Stock Exchange has approved the engagement of Infotech Middle East FZ-LLC subject to a successful contract negotiations.”
May 14th, 2014 by Tom Minney
The Nairobi Securities Exchange (www.nse.co.ke) is pushing ahead fast with its demutualization plans and will sell up to a 38% stake in an initial public offering (IPO) in June. According to a report on Reuters, NSE chief executive Peter Mwangi said the NSE will offer up to 81 million shares, subject to regulatory approval.
The offer price will be set by the IPO advisors closer to the offer date. The bourse will use the funds for new products and enhance transparency.
Reuters quoted Mwangi saying: “We want to list through an IPO on the main market. We need to open this listing before 30 June. That conversion from a private to a public company will position us to be a very effective player.”
“We are playing in a sweet spot where the frontier funds think Africa is rising. East Africa is a hot spot on the African map and we are the gateway into that east African region.”
Soaring profits, new products
The NSE’s pretax profit more than doubled to KES 379m shillings last year from 2012. It has been lifted by a surge in trading turnover after the 4 Mar 2013 presidential election went peacefully. The dynamic Nairobi exchange is a mutual company owned by its stockbrokers, and demutualization is the process converting into a private for-profit company, as reported on this blog. The ordinary shares have a nominal (par) value of KES 4 shillings ($0.05) each.
Kenya’s Capital Markets Authority is reviewing the exchange’s advanced plans to offer currency and interest-rates futures and options. The NSE futures market will offer standardized contracts for currency futures that will be traded. Mwangi said: “We are seeing more and more international investors who might want to invest in Kenya and they might want to hedge the currency risk.” Local banks offer foreign-exchange forward contracts, which are negotiated directly with buyers, but they cannot be traded.
Mwangi added that part of the funds raised in the IPO will be used to bankroll new products such as derivatives, exchange-traded funds (ETFs) and Sharia-compliant indexes. The NSE has already led the way with a number of FTSE-branded index products and is working with the CMA and CDSC to introduce a real estate investment trust (REIT) market in Kenya and trading platform and a futures and commodities exchange.
The 60-year-old Nairobi stock exchange has been diversifying through new sources of revenue including sales of publications, provision of services through the Broker Back Office (BBO) and data-vending. It bought a prime commercial property in Nairobi’s Westlands area to tap into rental income, according to a report in Standard Digital.
The region is enjoying many benefits from increasing regional integration under the East African Community (EAC). The Nairobi bourse is a key player in the East African Securities Exchange Association (EASEA), which aims to standardize regulations and operations within the region to make cross-border investing easier. Members are the Dar es Salaam Stock Exchange (DSE), the Rwanda Stock Exchange (RSE), the Uganda Securities Exchange (USE), and the Central Depository and Settlement Corporation (CDSC). It also has a memorandum of understanding with the Somalia Stock Exchange Investment Corporation (SSE) under which it will have primary responsibility for the technical development of the Somalia Stock Exchange including identifying the most suitable partners and expertise.
Regional integration has also boosted expansion among listed firms and investor confidence after the discovery large quantities of gas and oil across several east African countries. There are many cross listing between the exchanges.
Mwangi said they wanted to attract more listings on the NSE’s Growth Enterprise Market (GEMS) which is aimed at small firms wishing to list their shares. There is only one listing, property developer Home Afrika so far. The NSE hopes to attract more listings through easier listing terms such as allowing business owners to offer a minimum of 15% if the shares in the market. Mwangi told family business owners who may be reluctant to lose control: “With 85% you have effective control of your company but you enjoy all the advantages of being listed. We are in a sense offering the best of both worlds.”
The NSE is a key member of the African Securities Exchanges Association and an affiliate member of the World Federation of Exchanges (WFE) and intends to become a full member.
November 5th, 2012 by Tom Minney
According to news reports, the Board of the Zimbabwe Stock Exchange is close to negotiating an exit package with CEO Emmanuel Munyukwi, who was suspended in May. Board chairperson Eve Gadzikwa was reported by The Independent’s businessdigest that the board was in the process of concluding negotiations and an announcement is due in the coming week. ZSE operations executive Martin Matanda is acting chief executive.
Munyukwi has been CEO since 2001 but has been a key manager of the ZSE before that and was a valued colleague when this correspondent was running the Namibian Stock Exchange before 2000. The businessdigest suggests that although Munyukwi had been suspended on charges of alleged incompetence, currently the Board was negotiating an exit package with him and a figure of US$1 million was mentioned. Tony Barfoot, the previous CEO of the ZSE, was reportedly removed as consultant in April 2012, according to a report in Newsday.
There is no news on who will be the new head of the ZSE. It is possible that a potential candidate will be sought among Zimbabweans with experience of working in an automated and advanced securities exchange.
The Securities and Exchange Commission of Zimbabwe is reportedly working with the ZSE, introducing a central securities depository and electronic trading, with plans to automate the ZSE by March 2013, according to the news reports. One report says that SECZ has contracted a private company to develop a framework for establishing an electronic securities trading platform. State-owned ZB Financial Holdings has 13% of the CSD, National Social Security Authority 13% and Infrastructure Development Bank of Zimbabwe 10%, according to a shareholding agreement. The Expression of Interest tender for the CSD was published in 2010.
SECZ is also working with the ZSE on demutualization, although the ZSE is a private company more structural transformation may be possible. The tender for the advisory work on “ZSE Privatization” had a closing date of either March or September 2012, but the bidder was supposed to find their own funding for the work.
The Securities Act was amended in August 2012 to make SECZ more effective, extend its powers and give more protection to investors. This requires all securities exchanges in Zimbabwe to be companies, not mutual associations or other corporate bodies. There is a single Investor Protection Fund and the SECZ takes over regulation of asset managers and managers of collective investment schemes from the Reserve Bank of Zimbabwe. The CEO of the SECZ is Tafadzwa Chinamo.
Listings Executive Lina Mushanguri also told businessdigest that the ZSE is drafting a framework to set up a board for small and medium enterprises as part of the ZSE, which she said they would call it the “SMEs Stock Exchange”. This will have adjusted rules and regulations. The newspaper reports that income for the ZSE “last year” was $1.6m and expenses were $1.0 million, giving a surplus of $612,947. The ZSE website has been inoperative for many months and the ZSE annual report is not available online.
By 2 November the ZSE market capitalization had climbed back to $4 billion, after being below this for more than a year. It reached a high of nearly $4.3 billion in May-June 2011. Foreign investors contributed 80% of turnover in October, according to a report in the Standard newspaper.
September 4th, 2012 by Tom Minney
Months of hard work came to a climax when the Botswana Stock Exchange successfully launched its automated trading system (ATS) and now has live trading. This replaces the open outcry trading system and the aim is to make the BSE more visible and trading more efficient. The exchange has been using a central securities depository (CSD) since 2008 and this was upgraded alongside the implementation of the ATS.
The ATS was installed by MillenniumIT, part of the London Stock Exchange Group, after a BWP8.8 million ($1.1m) contract. MillenniumIT also installed the CSD.
The new system was implemented on Friday 24 August. The day before, Thursday 23 August, was a trading holiday, while Friday was a settlement holiday with trades settling instead on 27 August. These holidays were meant to enable the BSE to transition from the old CSD system to the upgraded version.
There is still a key target to encourage more shareholders to dematerialize their paper certificates and register them in the CSD for ease of trading. According to the BSE Annual Report, 46% of all domestic company shares and 91% of foreign company shares were dematerialized by December 2011, and so was the first corporate bond. In the annual report Chairman Patrick O’Flaherty notes “Along with the implementation of the ATS, our CSD (Central Securities Depositories) system is also being upgraded. This will ensure that the trading, clearing and settlement infrastructure of the BSE remains state of the art”.
In 2011 the BSE recorded average daily turnover of BWP4.1m. The volume of shares traded in 2011 was 458.7m, up from 308.7m in 2010. Letshego Holdings did a ten-for-one share split in 2010 and Furnmart and G4s followed suit in 2011.
INTERVIEW WITH HIRAN MENDIS, CEO OF BOTSWANA STOCK EXCHANGE
ACMN: What has the market participants’ reactions to the ATS?
HM: The response has been very positive. Automated trading is a completely new development in our market, but all market participants, particularly the brokers, have embraced the development and have basically hit the ground running. The amount of enthusiasm in the market is very humbling for the BSE.
ACMN: Were there any problems in the implementation?
HM: Apart from the normal day-to-day challenges that form part of any project, there were no major challenges. As the BSE, we had to work extra hard throughout the lifetime of the project to bring all stakeholders together and make sure that everyone is on the same page; that everyone understands and embraces the primary objective of bringing our market to par with other regional and international giants. Overall, it has been an extremely demanding but very rewarding experience for all stakeholders.
ACMN: Have you seen an increase in trading volumes?
HM: It’s still too early to say. In the first 2 days, it was quiet; probably because the traders were being cautious with the new trading platform. But turnover has since jumped back to previous levels.
ACMN: Are brokers now connecting from their offices (wide area network)?
HM: The brokers have been connecting from their offices since 2008 and this setup is still being used, even with the ATS. The networks have so far been very cooperative as we have not had any outages. The links that we have been using for WAN connectivity since 2008 have been very stable. On average, we have experienced less than 10 hours of downtime per year since 2008. About half of this downtime happened outside of trading hours.
ACMN: Can you give some technical details about the ATS and the CSD and their integration?
HM: The ATS is a trading platform, primarily responsible for accepting client orders, as input by brokers, and matching those orders on set criteria to produce trades. CSD system acts as a back-end for the ATS, handling the registry function for the ATS, together with clearing and settlement of all trades that happen at the ATS. For a client to be able to trade through the ATS, then they need to open a CSD account first. Communication between the systems is on a real-time basis and as clients buy/sell shares, their CSD account balances are updated in real time. The ATS is able to trade equity, debt, ETFs (exchange-traded funds), and GDRs (global depository receipts). Instruments that are currently actively trading through the ATS/CSD are equities and ETFs. Plans to include bonds are underway and CFDs will follow in due course. Trading currently happens from 10:30 to 13:30. The first trading session is an opening auction, followed by regular trading, then an interim auction session, then another regular trading session, which is followed by a closing auction session, and finally a closing price cross session.
ACMN: What future steps are planned – such as increased data flows, remote membership of BSE and direct market access?
HM: At this point we are more concerned with ensuring that that system continues to function according to expectations. Once the dust has settled and all stakeholders are comfortable with the system then the BSE will begin exploring availing market data in real-time to data vendors etc. After that, as a second phase of the automation drive, we will explore the possibility of Internet trading. As the BSE, we understand and appreciate that a wide spectrum of developments are now possible with an automated market. Funds and time permitting, we will build services around the CSD/ATS systems in order to turn our market into a true global player.
July 6th, 2012 by Tom Minney
The 10 stock exchanges of the Southern African Development Community (SADC) are working together to increase the effectiveness of their markets. The Committee of SADC Stock Exchanges (CoSSE) has agreed to concentrate on 6 priority areas in support of regional moves to more efficient capital markets.
The stock exchanges will explore ways to use technology to link their trading and order systems and work together to ensure clearing and settlement systems align with global standards adopted in April. They are working closely with SADC institutions to support development of regional systems, including payment and will boost visibility of trading data and enhance their joint website (www.cossesadc.org), launched in April by the JSE and I-Net Bridge. The bourses will also pool resources to accelerate training and skills development for capital markets staff.
CoSSE members are Botswana Stock Exchange, Malawi Stock Exchange, Stock Exchange of Mauritius, Bolsa de Valores de Moçambique, Namibian Stock Exchange, South Africa’s JSE Ltd, Swaziland Stock Exchange, Dar es Salaam Stock Exchange of Tanzania, Zambia’s Lusaka Stock Exchange, and the Zimbabwe Stock Exchange. They met on 25 June in Gaborone, Botswana in a meeting convened by CoSSE with support from SADC Secretariat.
“Stock exchanges have their roles cut out in each of our economies to augment our governments’ efforts to grow national economies for the greater good and as part of the SADC region’s struggle for growth to escape poverty,” says Mrs Beatrice Nkanza, Chairperson of CoSSE and CEO of the Lusaka Stock Exchange. “They are the channel for long-term risk capital, which is urgently needed for the region’s businesses, infrastructure providers and even governments. They also encourage saving and investment. CoSSE members are working closely together to support SADC initiatives and to make individual markets even more effective”.
CoSSE was set up in 1997 as a collective body of the stock exchanges in the Southern African Development Community (SADC). It promotes co-operation and collaboration between member stock exchanges and is resourced by a Secretariat, supported by the JSE. SADC defines CoSSE’s role in the Finance and Investment Protocol and other policy documents and CoSSE has links to ministerial and senior treasury bodies and also works closely with the Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA) and the Committee of Central Bank Governors (CCBG).
CoSSE had set up three working committees to implement six business plans, prioritized from the initiatives identified in its Strategic Plan 2011-2016. These are:
1. Legal and Secretariat working committee – chaired by Geoff Rothschild of the JSE. This is responsible for formalizing and resourcing the Secretariat, and for continuing and improving liaison with CISNA and other SADC organs.
2. Market Development working committee – chaired by Vipin Mahabirsingh of the Stock Exchange of Mauritius. CoSSE has been developing models for inter-connectivity between automated trading systems at some or all member exchanges. The working committee will help member exchanges ensure their clearing and settlement systems comply with new global standards and support regional initiatives.
3. Capacity-Building and Visibility working committee – chaired by Anabela Chambuca Pinho of the Bolsa de Valores de Moçambique. This will liaise with member exchanges, regulators, stockbrokers, investors and others to develop and coordinate training courses. It will also enhance the new CoSSE website, help members to upgrade their own websites and to ensure their trading data and company news are disseminated internationally.
Progress will be guided by an Executive Committee, consisting of CoSSE Chairperson Mrs Nkanza, CoSSE Vice-Chairperson Gabriel Kitua (CEO of the Dar es Salaam Stock Exchange in Tanzania) and the three working committee chairpersons. The strategic plan was developed with assistance from FinMark Trust.
For more information contact
• Beatrice Nkanza, CEO Lusaka Stock Exchange, tel +260 (1) 228391 or email nkanzab [at] luse.co.zm
• Gabriel Kitua, CEO Dar es Salaam Stock Exchange, tel +255 22 2135779 or email gabriel.kitua [at] dse.co.tz.
• Pearl Moatshe of CoSSE Secretariat, tel +27 11 5207118 or email pearlm [at] jse.co.za