Archive for the 'Fintech' Category

Mobile phone app for trading on Zimbabwe securities exchanges

Investors can check their portfolios and send orders to their stockbrokers on their smartphones in Zimbabwe with an app called C-Trade from today (4 July). C-Trade is an online and mobile trading platform for shares on the Zimbabwe Stock Exchange (ZSE) and the second licensed exchange, the Financial Securities Exchange (FINSEC).

According to an article in the Herald newspaper, C-Trade is for financial inclusion in Africa: “The platform will enable investors, both local and foreign to purchase securities from anywhere in the world anytime, using mobile devices. The initiative is being led by capital markets regulator, Securities Exchange Commission of Zimbabwe (SECZ), and seeks to promote financial inclusion by encouraging participation by the smallest retail investor.”

The Herald newspaper reported SECZ chief executive Tafadzwa Chinamo saying that President Emmerson Mnangagwa had agreed to launch the programme. “After that what you will be seeing more of is our campaign as SECZ to educate the public on what investing on the capital markets is about.”

“We have taken the issue of deepening and broadening the capital markets very seriously, to the extent that we added a new committee to our board of investor education.” In July 2017 Chinamo said SECZ had committed $300,000 to a campaign to get more people engaged in the capital market.

Escrow Systems headquartered in Zimbabwe has created the C-Trade programme to trade bonds and shares, using the same technology as Kenya’s world-first M-Akiba mobile Government bond sold on mobile phones to small investors in Kenya, from minimum denomination of $30. Here is our post on M-Akiba from October 2015 and a Reuters story on the eventual M-Akiba launch in March 2017.

According to a report in Newsday, Escrow Group chief executive officer Collen Tapfumaneyi said: “C-Trade is a mobile trading platform and is combination of a number of systems that enable investors to access the securities market or capital markets popularly known as the stock to enable people buy shares and all that. It comes in three forms, USSD application which can be utilised by mobile network subscribers. We have Econet and Telecel, but we are about to finalise with NetOne as well so within a few days all three will be on board,” It is not restricted to local mobile operators to enable foreign investors, including those in Diaspora.

Trading is still through a stockbroker, as before, says Chinamo of SECZ: ”This application is essentially sold to a stock broker to give the brokers clients access to the market. Rules of the exchange are still valid. For your trade to go through, it needs the authenticity of your broker so the broker is still liable for your trade, settlement, clearing and feed.”

The platform allows easier access for smart-phone users to manage their portfolios when they are away from a desktop/laptop.

Escrow is offering it on revenue-sharing basis to users with “minimal or no costs to market participants” according to an older news story in Financial Gazette.

According to an article today in Newsday, there are 13 licensed stock-broking firms in Zimbabwe, of which 3 signed up to use C-Trade. Escrow’s Tapfumaneyi said they were still talking about sharing fees: “C-Trade acts as an agent for the broker. The broker will still earn his full revenue according to the fee charged. However, the brokers pay a fee to use the platform which is negotiable.

“What we are basically doing is get business for them and they keep their traditional business. But, if we get people registering online and placing orders online, all that traffic is being channelled through to the brokers which then gets channelled to the exchange. So we are basically an extension of the brokers,” he said.

“These orders, when they come to the brokers, is also the issue of evaluation and trading is not just picking an order from a client and sending it through. You have got to analyse the market and advise the client what the pricing should be and all that. So we still have that interface.”

The target for C_Trade is about 20,000 individual participants by year-end and an ultimate goal of 2 million people.

African capital markets and innovation key to achieving African agenda

“The time is now to stop aspiring to building and focus on ensuring the African financial markets are actually built.”

    Paul Muthaura CMA Kenya (photo The East African)

  • African capital markets are key to African development visions but governments must prioritize market finance structures over donor and government-to-government finance.
  • How to mobilize over $1trn of assets in pension, insurance and collective investment vehicles across sub-Saharan Africa
  • Innovation at the core of Kenya’s 10-year capital markets masterplan, including M-Akiba bonds, regulatory sandbox, mobile platforms for securities trading
  • Governments to provide conducive environments
  • Capital markets connectivity to allow free flow of capital across borders to fund critical infrastructure for Continental Free Trade Area

Here are extracts from the speech by Paul Muthaura, CEO of the Capital Markets Authority of Kenya, this morning at the 7th annual “Building Africa Financial Markets Seminar” in Nairobi.

Also present was HE William Samoei Ruto (Deputy President of Kenya), Oscar Onyema (President of African Securities Exchanges Association (ASEA) and Chief Executive Officer of the Nigerian Stock Exchange), Sam Kimani (Chairman of the Nairobi Securities Exchange) and Geoffrey Odundo (CEO of NSE).

“This conference also comes closely on the heels of the admission of the NSE to the World Federation of Exchanges which acknowledges the trajectory of our markets’ growth in recent years and reinvigorates us for the journey ahead as we seek to position the NSE as a globally competitive platform for wealth creation, a global cross roads for investment and risk management and a critical catalyst for economic transformation.

“The central role of deepening capital markets to finance infrastructure, business enterprise and overall economic development is increasingly a key pillar of policy makers’ agendas in Africa. For instance, the African Union (AU) Agenda 2063 prioritizes the development of capital markets on the continent to strengthen domestic resource mobilization and to double market-based financings’ contribution to development financing.

“Similar prioritization is found in several national visions including Nigeria’s FSS2020, Zambia’s Vision 2030, Rwanda’s Vision 2020, Uganda’s Vision 2040 and of course the Kenya Vision 2030. Over US$1 trillion in assets are currently held by pension, insurance and collective investment vehicles across sub-Saharan Africa so the challenge to us in this room remains how are we going to leverage these pools to crowd-in the significantly larger pools of global capital necessary to fund the meteoric rise of this continent.

Innovation

“Institutions or sectors that do not prioritize innovation are ultimately relegated to stunted growth, poor competitiveness and ultimately, redundancy. The very fact that we are all gathered here today affirms that as a continent we are committed to actively deliberating on proactively adapting to emerging innovations. To institutionalize this commitment to constructive innovation at a national level, the Authority was honoured to convene our sector and international partners to put in place the Capital Markets Masterplan (CMMP) – a 10-year strategic policy document that targets to stimulate innovation to broaden product and service offerings, deepen market participation and liquidity, and drive transformative economic development for Kenya and the wider region.

“Any conversation on innovation appears inseparable from a deliberation on the global efforts to continuously update business models in line with technological changes cutting across product/services design, infrastructure, access and supervision. To this last point, regulators are increasingly challenged to rethink their supervisory models to align regulatory requirements with market needs is a fast-changing environment.

“For some time now, Kenya has been sitting in a unique position as a bustling hub for impactful innovation, ranging from MPESA – a fast and convenient mobile money platform to M-Shwari – a mobile-based savings product. Not to be left behind, Kenya’s capital markets have through various initiatives have been angling to put the country on the global innovation map. These initiatives include;

  • The recent launch of M-Akiba – a mobile-phone-based retail government bond primary and secondary market investment platform,
  • The on-going efforts to establish a Regulatory Sandbox for Kenya’s capital markets to provide an ideal platform for testing of ideas/innovations/products/services etc. before they are rolled-out to the wider market; and
  • The development of a wide spectrum of mobile based platforms for securities trading.

“As a regulator cognisant of our dual mandate of regulation as well as development, the Authority has also operationalized principle-based approval powers to allow for the accelerated introduction of new products including exchange-traded Funds, GDR/Ns (global depository receipts) and asset-backed securities.

Right foundations

“It is critical, particularly given the nascent state of markets on most of the continent, that we do not lose sight of the critical importance to build our markets on the right foundations. In a world where we are eternally competing for highly mobile capital, we must prioritize the development and more critically the transparent enforcement of world class legal and regulatory frameworks; in pursuing innovation, we must not forsake robust market infrastructure that provides pre and post trade transparency and engenders confidence in settlement finality; we must ensure that the products and services being developed are actually relevant and responsive to the economic needs of our environment, resonate with the political priorities of our governments and strengthen the savings and investment habits of our citizenry.

“We must challenge our governments to provide conducive macro-economic, political and fiscal environments for markets to grow. Difficult as it may be, we must be willing to prioritize market-based funding models over traditional government-to-government and donor funding models. What appears concessionary today will likely be unsustainable tomorrow where the necessary market dynamics have not been built to support private sector growth and SME business as the engines for long-term sustainable economic growth and as a critical source of tax revenue to ensure debt service and sustainability.

“We must challenge our market intermediaries to raise their operational and technical standards to be able to support responsive product design and ethical practices, all parties need to come together to drive both issuer and investor education on the full spectrum of financing options available to them to ensure the supply side is as dynamic as the demand side’s need.

“We must challenge our domestic institutional investors to make the difficult decisions to diversify into appropriate market-based risk products that allow for effective asset-liability matching in place of traditional government debt and, needless to say, proactively work with government to consistently lower government borrowing rates in order to tackle the crowding-out effect all too common with the easy availability of double-digit risk-free assets.

“If we are to deliver robust African capital markets we must deepen the capacity of the complementary professionals, support independent auditor oversight, robust corporate governance and globally benchmarked certification standards.

“Introduction of REITS (real estate investment trusts), operationalizing collateral management and liquidity management tools like REPOs and securities lending and borrowing, Impending green finance, roll-out of Islamic finance, delivery of commodities exchange and warehouse infrastructure, derivatives markets to support hedging, online forex trading (FX CFDs), and leveraging fintech to support access and market growth, are all critical components in deepening and diversifying the capital markets that have received and continue to receive strong support from the government in partnership with market stakeholders.

Pan-African challenge

“With the introduction of the Continental Free Trade Area, it is for the capital markets to address pan-continental connectivity to allow for the free flow of capital across borders to fund the critical infrastructure necessary to support the free movement of goods and services under the free trade area. The time is now to stop aspiring to building and focus ensuring the African financial markets are actually built.

“As the capital markets regulator, we are keen on actively playing our role in positioning Kenya as an investment hub for East and middle Africa. By 2023, we envision Kenya as the choice market for domestic, regional and international issuers and investors looking for a safe and secure investment destination.”

For the full speech, see the CMA Kenya website.

Top learning on the future of African exchanges – BAFM seminar this week 19-20 April

The 7th Building African Financial Markets (BAFM) seminar has a top lineup and tomorrow (17 April) is the last day to register The seminar is part of the annual programme of capital markets development and synergies of the African Securities Exchanges Association and is also backed by the World Federation of Exchanges. It is hosted by Nairobi Securities Exchange, will be on 19-20 April at the Villa Rosa Kempinski Hotel in Nairobi.

Leading the programme will be William Ruto (Deputy President of Kenya), Geoff Odundo (CEO, Nairobi Securities Exchange), Samuel Kimani (Chairman of the Nairobi SE), Oscar Onyema (President of ASEA and CEO of the Nigerian Stock Exchange), Paul Muthaura (CEO of the Capital Markets Authority of Kenya).

Topics are focused on market structures, innovation, new technology and linkages, including top international speakers:

• Adaptive innovation and the blueprint for orderly markets in Africa – Siobhan Cleary (Head of Policy and Research, World Federation of Exchanges) and Stebbings Archie (Principal, Oliver Wyman)
• Building blocks for innovative markets: effective risk management for clearing and settlement, a CCP in a box – Stuart Turner (Founder, Avenir Technology)
• Building new markets in a frontier economy and the impact on indigenized solutions: The Kenyan experience – Terry Adembesa (Director, Derivatives Markets, Nairobi SE)
• Linking African exchanges organically – Selloua Chakri (Managing Director, SCL Advisory)
• Building blocks for innovative markets: A guide for managing cyber risk – Joseph Tegbe (Partner and Head of Technology Advisory at KPMG, Nigeria)
• FinTech as an enabler for sustainable development: An innovation showcase – Panel with moderator Catherine Karita (Executive Director at NIC Securities), Farida Bedwei (Co-Founder and Chief Technical Officer, Logiciel Ltd), David Waithaka (Chief Strategist at Cellulant Kenya), Candice Dott (Head of Market Development and Customer Experience across Africa, Thomson Reuters), Alex Siboe (Head of Digital Financial Services at KCB Bank Kenya) and Julianne Roberts (F3 Life)
• RegTech: Leveraging technology in the effective risk management and regulation of African capital markets – Michele Carlsson (Managing Director, Middle East and Africa, Nasdaq)
• Effective financial education: The role of emerging technology in contemporary Africa – Abimbola Ogunbanjo (Managing Partner, Chris Ogunbanjo & Co.)
• Financial innovations in SME financing: Opportunities for African MSMEs – Sofie Blakstad (CEO, Hiveonline)
• Disruptive technologies reshaping the future of African financial markets: M-Akiba – Irungu Waggema (Head of IT, Nairobi Securities Exchange)
• Impact of EU Regulation on African Capital Markets (EMIR, BMR, MIFID II, GDPR) – Anne Clayton (Head of Public Policy, Johannesburg Stock Exchange)
• Financing sustainable development: Product and market innovations – Anthony Miller (Coordinator at the Sustainable Stock Exchange Initiatives)
• Disruptive technologies: Blockchain – the future of finance or a flash in the pan? – panel with moderator Ade Bajomo (Executive Director, Information Technology and Operations, Access Bank), Reggie Middleton (CEO and Founder of Veritaseum), Abubakar Mayanja (MD of ABL), Adriana Marais (Head of Innovation SAP Africa) and Samuel Maina (Research Scientist at IBM Research Lab Africa)

It’s a key gathering for Africa’s securities exchanges and key learning for all interested in the future of capital markets and their role in African development. For more information and for bookings, rush to this registration link.

Strate’s CEO Monica Singer steps down to focus on blockchain

Monica Singer, the former CEO of South African central securities depository Strate, stepped down at the end of August 2017. Monica had been the project manager of Strate since its inception, and has led the organization for nearly 20 years. She will concentrate full time on blockchain.

Maria Vermaas, who has been Head of the Legal and Regulatory Division since the start of Strate, has been appointed as Interim CEO. The long-standing executive team will continue to drive strategic objectives, according to an announcement from Strate, which adds that Monica is leaving “to fulfil her dream of living in Cape Town and to pursue new opportunities”.

“Monica’s entrepreneurial spirit, together with her visionary leadership” drove the introduction of electronic settlement for South Africa’s financial markets. Strate is proud of “being a Conscious Company that creates shared value for all stakeholders” and globally recognized as one of the most progressive CSDs.

Monica says (in the statement): “I have always had a passion for innovation and technology that drives societal change. With the potential disruption that the financial markets may face, particularly with disruptive technologies like blockchain, I will continue to research to stay ahead of developments which may lead me to consulting on these topics.”

She has been key in several networks that share ideas internationally including as Vice President of the Africa & Middle East Depositories Association (AMEDA), over 18 years in the International Securities Services Association (ISSA), World Forum of CSDs (WFC) and Americas’ Central Securities Depositories Association (ACSDA).

Strate Chairman Rob Barrow, comments: “The Board, together with the Executive team and staff, would like to thank Monica for her contribution to Strate and the legacy that she has left behind. We would like to wish her all the best for her future endeavours.”

Full time in blockchain
According to this news story by Michael de Castillo on Coindesk, Monica is devoting her considerable energies “to dedicate her career to bringing blockchain to industries from finance and insurance to medicine and retail”.

Monica Singer: Blockchain is coming and its going to change the world (Photocredit: coindesk)

“In her first conversation with the media since her resignation, Singer explained how she believes the tech could help her finally cut out what she describes as ‘unnecessary middlemen.’

“Singer told CoinDesk: ‘I’m so in love with blockchain, that the only thing I’m doing, all the time, is telling the world, “Guys, wake up! This is coming, and this is going to change the world.”’ According to the story, Monica will use her global contacts to widen her interest beyond the financial sector. The article mentions ethereum startup ConsenSys and digital ledger startup Ripple among the “fintech” companies Monica is interested in working with.

She still believes CSDs can provide important services, even if blockchain means they will “not have a role to play” in the blockchain world. She is set to speak at the Sibos banking conference in October on blockchain in the cash and securities settlement space and at the World Federation of CSDs in Hong Kong in November.

It quotes her saying: “I love saying to people: ‘Give me a brief description of your industry.’ I can quickly tell them in which way that industry will be affected by this new, incredible technology. So, that’s what I need to do.

“I was the person who moved South Africa’s financial markets from paper to digital.. When I discovered blockchain, I thought this is exactly what we need in the world.”

Brief history of clearing and settlement in South Africa
Johannesburg Stock Exchange rang the final bell on 108 years of open-outcry trading on 7 June 1996. Most recently trading had been in a huge hall at the bottom of its then headquarters in Diagonal Street, so the noise of trading filled the whole building when the market got busy. From market open on 10 June all equity trading has been on the automated Johannesburg Equity Trading system. As volumes increased, stockbroker back offices talked about “how many feet of work do you have?” referring to the huge piles of share certificates and transfer forms stacked high on desks, while the motorcycle delivery drivers at the back of Diagonal Street and Kerk Street, Johannesburg, got ever busier.

Electronic clearing and settlement were urgently needed but the banks that dominate this aspect of capital markets had each invested in their own systems. They had further formed the Bond Market Association to create a self-regulating bond exchange in 1990 and had worked with the South African Reserve Bank the same year to form UNEXcor to set up an electronic settlement system using a CSD. The first fully electronic settlement through UNEXcor and the CSD (called CD Ltd) had been on 26 October 1995.

Monica, famous for long-term vision backed by unstoppable energy, was brought in to break the logjam and move the market forward in 1998. Gold-mining group Harmony was the first equity on the JSE to move to full dematerialization of securities in 1999 and the whole market followed in orderly stages.

According to a brochure by Strate a few years ago: “The transition to an efficient electronic-settlement system increased market activity and improved the international perception of the South African market by reducing settlement and operational risk in the market, increasing efficiency and ultimately reducing costs. Accordingly, by heightening investor appeal, Strate has enabled South Africa to compete effectively with other international markets and not just those of emerging markets.

“Since 2000, Strate has used the South African Financial Instruments Real-time Electronic Settlement system (SAFIRES), an adaptation of the Swiss securities settlement system (SECOM), operated by SIX SIS Ltd, to continuously provide investors with secure and efficient settlement of equities.”

UNEXcor merged with Strate in 2003 and as the platform became more aged, Strate began market consultation to replace the technology and move to a Securities Ownership Register for bonds.

Participants set up the Money Market Forum in 2002 for dematerialization of money-market securities and awarded the contract to do this to UNEXcor, which devolved to Strate after the merger. After extensive market consultation, Strate developed the business requirement and employed Tata Consultancy Services (TCS) to develop the code. Successful testing was completed on 1 October 2008 and Rand Merchant Bank issued the first electronic security to Strate via FirstRand Bank in November 2008. Electronic settlement of newly issued money market securities began in the second half of 2009.

The latest transformation was the switch to T+3 settlement across the South African capital market, carried out successfully on 11 July 2016 and profiled on this blog.