African Capital Markets News » Central Depository

Uganda moves towards immobilization

Tom Minney — Thu, 24 Jun 2010 22:36:33 +0000

The Uganda Securities Exchange (www.use.or.ug) is aiming for a 28 June deadline to finish immobilizing the shares listed for trading, according to a statement issued by the bourse and reported in local media. Companies whose shares are being moved into electronic form include Bank of Baroda, East African Breweries, Equity Bank, Jubilee Holdings, Kenya Airways, National Insurance Corporation and British American Tobacco, reports East African Business Week (www.busiweek.com).
Investors have been gradually moving from holding paper certificates as proof of owning shares in a company to keeping them through electronic records at the Securities Central Depository (see the USE website ). Once a share is held on an electronic register, shareholders cannot use their old share certificates.
The aim is to support automated trading on the USE, which could start as soon as next January. The paper quotes a market analyst as saying: “Liquidity once again will be the issue but this is not likely to impact the market performance in the long run.” However the paper says that the immobilization, which started on 29 April with the immobilization of Stanbic shares, has led to lower trading volumes on the exchange.
The paper quotes the Manager of the Securities Central Depository, Joel Lutamaguzi, as being happy with progress: “The ultimatums have worked. I am thrilled with the response from the public and if we can get this through this process then we will be getting closer to automated trading.”
Investors are opening accounts with the Securities Central Depository Agents (SCDAs), who are mostly broker/dealers and include all the brokerage firms licensed by the Capital Markets Authority and commercial banks.
The Nairobi Stock Exchange (www.nse.co.ke/newsite/) also uses automated trading and a securities depository. Nairobi also reportedly saw lower trade volumes during immobilisation.
The USE has been trading since 2000, and its first listed company was Uganda Clays.
The New Vision newspaper interviews Harriet Kiwanuka, the USE’s research and market development manager. It quotes her as saying: “Immobilisation means shares are pooled into the system and for anybody to trade, you need to get your certificate to the SCDA who will deliver it to the USE for depositing to certify trade. Once a counter is immobilised, you cannot use a paper certificate to trade on the floor. Everything has to be entered into the system for trade to occur.
“We cannot run a parallel system of trading electronically held securities parallel to paper securities because of the risks, and reconciliation challenges involved.
“We are only trading electrically deposited securities. Anybody holding Stanbic, New Vision, DFCU, Uganda Clays and Kenya Commercial Bank certificates has to go to SCDA because these counters have been immobilised.”
She says that there has been a lot of education, but many people will only immobilize their share certificates when they decide to sell and, although there is demand, prices are lower and many sellers are not keen. However, response on immobilization has been satisfactory and she says 300 million shares have been immobilized in 1,400 new accounts. The response is across the board, with account openings by the locals, institutions and foreigners which means education efforts are paying off.
The Nairobi Stock Exchange has already immobilized shares, and faced a similar task of convincing shareholders to act, until the listing of Safaricom. Immobilization and electronic trading are part of moves towards an integrated East African securities market.

Uganda central securities depository went “live”

Tom Minney — Sun, 21 Feb 2010 09:00:45 +0000

The Uganda Securities Exchange (www.use.or.ug) was set to open the Securities Central Depository at the end of last week. The SCD is an electronic system of keeping traded shares records at the stock market in a single location and would end the issuing of paper certificates as evidence of ownership.
According to the Monitor newspaper (www.monitor.co.ug), the SCD was to “go live” on 18 February, quoting Ms Harriet Kiwanuka, the head of trade, research and market development, USE. The move will prepare the USE for electronic trading of shares and is another step towards link-up in the regional markets, including the advanced Nairobi Stock Exchange.
Stockbrokers are set to ask owners of the paper certificates to return them in exchange of electronic transaction accounts, similar to bank accounts.
Ms Kiwanuka is reported as saying both new paper certificates and electronic accounts will be issued until the USE adopts electronic record keeping and trading.
Mr Peter Okoed, the senior portfolio planner at stockbroker Dyer & Blair (www.dyerandblair.com), is reported in Monitor as saying that the SCD will make the exchange attractive to foreign investors who are usually discouraged to invest by the communication that it takes for them to receive their share certificates.
With this system, investors will only trade their shares after getting electronic accounts.

Nigerian Stock Exchange seeks $33 mln for new software and Sierra Leone bourse

Tom Minney — Thu, 12 Nov 2009 16:56:58 +0000

The Nigerian Stock Exchange (NSE – www.nigerianstockexchange.com) on 9 November announced that it is seeking some N5 billion (US$33 million) in capital for its fifth software upgrade and also to help finance the Sierra Leone stock exchange.
NSE Director General Ndi Okereke-Onyiuke reportedly told local media that the exchange’s software has been upgraded four times, with the next in 2010, at a likely cost of 16 mln-20 mln euros ($24 mln-$30 mln). She added that the London Stock Exchange had reportedly spent 30 mln euro on its software, and talks continue on how the LSE could help in Nigeria.
Apparently donors gave grants to Ghana, Kenya, Tanzania and Uganda to upgrade their stockmarkets, but believe that Nigeria is too rich to need this.
The Sierra Leone stock exchange was launched by Sierra Leone President Dr. Ernest Bai Koroma on 17 July 2009, after being inaugurated in 2007. According to Nigerian media, the NSE launched the Sierra Leone exchange free of charge and now seeks financing for electronic trading there. The Sierra Leone exchange is under the wing of the central Bank of Sierra Leone (www.bankofsierraleone-centralbank.org). Okereke-Onyiuke said the NSE assisted Ghana previously and plans to help Liberia open a stock market.
According to other reports, the NSE earlier this year cut its holdings in the Central Securities Clearing System Ltd (www.cscsnigerialtd.com) from 100% to 30%, after a private placement of the shares.
The CSCS is the clearing house and central securities depository of the Nigerian stock market. It includes an integrated central securities depository (CSD) offering clearing (electronic book-entry transfer of shares from seller to buyer) and settlement (payment from buyer to seller) for all NSE transactions. All securities listed for trading on the NSE must have their certificates deposited in CSCS before transactions can take place. The CSCS was incorporated in July 1992 and started operating in April 1997.
She is reported to have told the House of Representatives Committee on Capital Markets: “We had to do this because our shareholders wanted to have better stake in the company, and again it gives room for proper corporate governance and a sense of belonging to all our stakeholders.”