Archive for the 'Innovation' Category
November 5th, 2012 by Tom Minney
Nigeria’s Securities and Exchange Commission (www.sec.gov.ng) hopes to boost liquidity on the Nigerian Stock Exchange (www.nse.com.ng) by getting previously privatized enterprises to list their shares. Arunma Oteh, Director General of the SEC, also said that demutualization of the NSE is on track, according to a report in the local Vanguard newspaper, and the commission is still working on the framework and guideline to before the exercise starts.
Oteh said the SEC is to meet the Bureau of Public Enterprises (BPE): “The Commission will be working with the BPE to ensure that already privatized entities before now are listed on the NSE based on the agreement they had with the Bureau. For instance Eleme Petrochemical, one of the companies previously privatized, is doing well and the portion of government shares could be listed on the exchange to allow the indigenes own stake and participate in the fortune of the entity.” She said recently privatized power sector companies could boost the volume and value of transactions by listing on the NSE.
She also praised efforts by the NSE to attract more companies to list: “This is the reason why the Commission approved the multiple listing requirements recommended by the NSE. This has not been in existence before now.”
Demutualization is a process for turning an exchange from a mutual association, usually owned by stockbrokers and other stakeholders, into a for-profit company. It can split ownership from licences to trade and in some cases, such as London and Johannesburg, the stock exchange itself becomes a listed entity. Ms Oteh said: “The committee on demutualization has finished its work and we are currently working on the frame work and guideline that will be put in place. Once we are through, the Commission will announce it. Demutualization will ensure owners of the Exchange get real value of their entity.”
She also said the SEC is working with the Association of Stock-broking Houses of Nigeria (ASHON) to consolidate stockbrokers and a committee on market development is still working to find ways to address minimum capital requirements, upgrading technology, and capacity-building, among others. She said a new guideline is expected from the National Pension Commission (www.pencom.gov.ng) which will further boost activities in the market.
November 4th, 2012 by Tom Minney
South Africa’s JSE Ltd (www.jse.co.za) continues to expand its commodity derivatives range. It has added silver and platinum “quanto futures” to its existing gold, copper and Brent crude quanto futures launched earlier this year. It is also helping develop the South African grain market by allowing Safex silo receipts to complete a futures contract, so that producers and buyers can trade grain with a bid or offered premium depending on location, for instance if a buyer wants grain in a particular location.
The JSE has partnered with Rand Merchant Bank, which is the initial market maker. The commodities are referenced as part of the JSE’s existing licensing agreement with the CME Group.
Commodity gain, without currency pain
According to a JSE press release on 1 Nov, a quanto future is a derivative instrument which, on the JSE, is a ZAR-denominated commodity investment product which delivers the same payoff as a pure USD-denominated commodity investment. This lets investors gain exposure to the foreign underlying commodity without being exposed to the USD-ZAR exchange rate. It simplifies decisions and allows investors to focus only on the returns of the underlying commodity.
Chris Sturgess, Director of the JSE’s Commodities Division, says: “We have seen keen interest expressed in the new Quanto Futures we offer and by adding silver and platinum to the product offering, we continue to provide derivative market participates with opportunities to easily access the international commodities markets.”
Growing grain markets
Trading in grain silo receipts to settle grain futures contracts is likely to benefit both producers and buyers, according to another JSE press release. Producers can negotiate a better price for stock in the specific silo represented in the receipt by placing an “offer” onto the system for a premium over and above the Safex price. Buyers such as millers and processors will benefit through access to bid at all registered delivery points at a premium per ton, regardless of whether or not physical grain is on offer. Buyers will be able to bid for preferred delivery locations. Previously no bids were permitted without available stock on offer.
There are more than 200 registered delivery points. The silo owner continues to guarantee the quality and quantity of the physical stock on the Safex silo receipt. However, the JSE guarantees the cash-flow process and settlement, so there is no risk of counterparty default. Settlement will take place over a 2-day cycle, meaning a trade is settled the next business day after trade, eliminating the delayed payments generally associated with cash market transactions.
The price when making physical delivery is a function of Safex’s mark-to-market price on the day, less the location differential (indicative transport cost) to the registered delivery point. With this new functionality the value of grain at each delivery point can be negotiated transparently between buyer and seller and included in the final settlement price.
The JSE says it offers a first-world trading environment, with world-class technology, surveillance and settlement, in an emerging market context. It is among the world’s top 20 largest equities exchanges by market capitalisation.
September 18th, 2012 by Tom Minney
Today (18 Sept) the Nigerian Stock Exchange is to launch its market-making programme, according to its press release. This will be a hybrid process, with market makers offering 2-way (buy-sell) price quotes in selected securities and a continuation of the current process in which licensed broker/dealers of the NSE submit orders.
The launch follows drawing up rules and operational guidelines. Role-players such as market makers, securities lenders, short sellers, settlement banks, pension fund administrators, insurance companies and listed companies have been trained, including in an 11 Sept workshop.
According to Bloomberg, citing stockbroker Securities Africa Ltd, price bandwidth movement has been increased to 10% for stocks that have market makers assigned to them, instead of the current 5%. Bloomberg cites David Adonri, CEO of Lagos-based Lambeth Trust and Investment Co: “Brokers have been informed of the new limit which is intended to make market making function properly, as widening the price band will enable market makers to recoup investments in stocks, cover risk and remain in business.”
Olumide Lala, the Head, Transformation and Change of the NSE, said that market makers will provide 2-way quotes (buy and sell prices) for the securities that they are making markets on. They will be able to leverage the securities lending process and borrow to settle “buy order imbalances” from customers. Investors will be able to use the securities lending processes to earn returns on their “idle” stocks whilst contributing significantly to market liquidity and price efficiency through legitimate investment activity in covered short selling.
The Nigerian bourse announced the names of the 10 broker/dealer firms selected as market makers on the trading floor of the NSE at the start of April 2012, after a rigorous selection process. Oscar Onyema, CEO of the NSE, described it as a major landmark in enhancing the liquidity and depth of the second largest market in sub-Saharan Africa: “This is a great milestone and a major step in the direction of turning the market round to have liquidity and depth back into the market. We will continue to move forward on this”.
The 10 stock-broking firms selected from a list of 20 that applied were: Stanbic IBTC, Renaissance Capital, Future View Securities, Vetiva Capital, ESS/DunnLoren Merrifield, WSTC, Capital Bancorp, FBN Securities, Greenwich Securities and CSL Stockbrokers.
According to Onyema: “The companies selected went through a very rigorous process and met the minimum net capital requirement of N570 million ($3.6m). We also examined their compliance history and looked into their operational capabilities including their technology and processes. The selected firms were taken through trainings, debated the appropriate market structure to be used and The Exchange further went through the approval of the Securities and Exchange Commission (SEC) in the selection process.” The April announcement also included the selection of a basket of quoted companies in which the financial intermediaries would provide the desired level of liquidity via a blind draw.
September 14th, 2012 by Tom Minney
A London-based Social Stock Exchange (SSE) aims for launch in the second quarter of 2013. It plans to partner with a Recognised Investment Exchange to create an investment exchange authorised and regulated by the Financial Services Authority (FSA) for trading in securities of social enterprises and other social purpose businesses. The SSE team are building the trading platform, the pipeline of companies who wish to list, the market-maker and broker communities, and the community of impact investors and have offices in central London, UK.
The goal is to build a securities exchange that lists social businesses from around the world and attracts capital from individuals, private clients, family offices, foundations and institutional investors who are seeking both a financial and demonstrable social return. The target is to become the premier trading venue for social businesses wishing to raise risk capital and for social impact investors who wish to find global businesses that reflect their values.
The team brings together stock-exchange professionals, investment bankers and asset managers. Its offices are based in London Bridge, London UK. The exchange will be open to a wide range of retail investors, including tax-efficient schemes and personal pensions.
Target sectors for listings are smaller high-growth health, educational and environmental companies and also enterprises seeking to finance social and affordable housing, social transport, green and ethical consumerism, clean-tech, green-tech, waste, water, recycling, regeneration, education, public health, sustainable forestry and organic agriculture. It will also help enterprises that work with large numbers of poor (“base of the pyramid”) to help them build economic activity. It is firming up commitments from companies to list and from investment banks to work in partnership and as advisors.
Co-founder and CEO Pradeep Jethi told African Capital Markets News: “Many of the larger City brokers and law firms are working with us, as are social-impact auditors from the ‘big four’ down to smaller niche organisations.”
The SSE aims to become a deal-aggregation platform with global visibility aimed at impact investors across private wealth managers, family offices, foundations and institutions. Ordinary investors will also be able to pick and invest in SSE-listed social ventures, using traditional stock-broking services. Jethi explained: “The main advantage is that the social enterprise’s shareholder base becomes dominated by impact investors who share the mission of the company as well as its growth and financial prospects. By having an aggregated trading venue of social enterprises with common and high standards of regulation, governance and social reporting, this lowers the cost of search and cost of due diligence for investors and therefore provides the advantage of ultimately lowering the cost of capital for a social enterprise.”
The Social Stock Exchange was initially funded by the Rockefeller Foundation as part of their programme to develop global impact investing infrastructure, which also includes the Global Impact Investing Network (GIIN), BLabs/BCorporations, the IRIS impact metrics taxonomy, and GIIRS (the Global Impact Assessment Ratings System). Partners such as international banks and foundations, including J.P.Morgan, Prudential, Deutsche Bank, Triodos Bank, UBS, Calouste Gulbenkian Foundation, Doen Foundation, Ford Foundation and W.K. Kellogg Foundation, are committed to promote impact investing and have contributed research or direct interventions to stimulate the impact investing marketplace.
The SSE company was registered in 2007 and the earliest work commenced with nef (New Economics Foundation), Community Action Network and Office of the Third Sector (now Office of Civil Society).
It raised £250,000/$500,000 from the Rockefeller Foundation; completed extensive market scoping and testing work in 2008, and did research which showed that social enterprises and social investors were positive to the SSE concept. It continued to build support and networks until 2012 when it raised £2m in a second round of funding from a syndicate of strategic investors to provide the working capital to build, market and launch the exchange and to cover up to 6 years of operating costs.
September 8th, 2012 by Tom Minney
A partnership between the innovative Stock Exchange of Mauritius and social enterprise Nexii is making great progress towards setting up the Impact Exchange (iX) board on a globally recognized stock exchange. This will enable businesses that have social impact to list debt and equity securities, as allow impact investment funds to list. According to a report on Forbes.com, so far 6 companies have gone through the iX board listing process and the board expects to start trading in the third quarter of 2013.
SEM is a member of the World Federation of Exchanges and one of platforms for trading debt, equity and derivatives, and it can also trade and settle in many currencies, including USD, GBP, Euro, Mauritian Rupee. SEM is regulated by the world-class Financial Services Commission of Mauritius and has automated trading and settlement services. It is a recognised stock exchange by Her Majesty’s Revenue and Customs in the UK, and an approved stock exchange by the Cayman Islands Monetary Authority. SEM’s data is live on all major international data vendors – including Bloomberg, Thompson Reuters, Financial Times, Factset and I-Net Bridge – provided significant global access for listed companies and investors alike.
Nexii was created by Tamzin Ractliffe, a South African pioneer in impact investing marketplaces. The new marketplace is aimed at the retail market, so that any investor will be able to buy and sell shares not just qualified specialist investors. Ractliffe initially set up a platform for unlisted securities 12 years ago. In 2009, she worked with the Rockefeller Foundation to bring together a group of social entrepreneurs/impact investors interested in creating social stock exchanges and marketplaces. She spent 18 months researching the market and, in May, 2011, she received formal regulatory approval from the FSC to launch the iX.
For all of the 6 companies that will launch the iX, this will be their first listing. Forbes.com correspondent Anne Field quotes Ractliffe: “Going to the market for money is not something they’re used to. The process of encouraging companies and getting them to understand the value of being part of a marketplace – that’s been quite a lot of work.” To be eligible for listing, companies need a clear social or environmental mission and need to have in place a reporting system for non-financial impact. The also need to work with intermediaries, known as Authorized Impact Representatives (AIRs), who are accredited to NeXii. Nominated Impact Advisors help the social enterprise during the listing process. Once the company is listed, Impact Verification Agents work with the business to make sure it meets ongoing reporting requirements and audits impact reports. Ractliffe says she’s accredited a handful of impact advisory firms so far.
The process can be costly and Ractliffe says she is discussing creating a technical assistance advisory fund that would help finance the cost of the listing process with “a number of development financing institutions”. This fund would also have a financial and impact return.
The new stock exchange was launched in May 2011 at the first Social Capital Markets (SOCAP) Europe Conference at the Beurs van Berlage in Amsterdam – the site of the creation of the capital markets where the first stock was traded in 1602.
According to the NeXii website: “We believe that this board is a powerful tool for facilitating the flow of investment capital to social businesses. The iX represents the next generation of stock exchanges and how these established financial institutions can help transform the capital raising opportunities available to social businesses. The iX provides mission protection for listed social businesses. This means that your reputation as a social business is maintained even though you are issuing public securities. The iX is fully committed to all stakeholders in the impact capital market and it is an effective platform to coordinate information, build intermediary activity and enable analyst coverage of impact investments. The iX is how we connect social businesses to public capital and mainstream investors to change.”
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.
May 16th, 2012 by Tom Minney
Five leading Africans and innovators were named Social Entrepreneurs of the Year 2012 Africa last week at the World Economic Forum on Africa in Addis Ababa, Ethiopia. The awards are made by the Schwab Foundation for Social Entrepreneurship and were presented by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.
The five winners include 2 entrepreneurs from South Africa and 1 each from Ethiopia and Rwanda, plus an award to a team (2) in Burkina Faso:
Bethlehem Tilahun Alemu, Co-Founder and Managing Director, soleRebels, Ethiopia
SoleRebels uses recycled car tyres for rubber soles to create durable, stylish and eco-friendly footwear for international markets. It offers training and employment to hundreds of underprivileged workers in Ethiopia, tapping the country’s rich artisan heritage and creating a new employment model for local enterprises. it also uses other environmentally friendly practices and is committed to zero carbon footprint.
Sameer Hajee, Chief Executive Officer, Nuru Energy Group, Rwanda
The group works with micro-entrepreneurs to disseminate its Nuru LED light, which gives up to 26 hours of light and costs one-sixth of the cost of kerosene to recharge. It can be recharged using an off-grid, pedal-powered platform. So far, Nuru Energy has set up 70 village-level entrepreneurs who have sold 10,000 Nuru lights. Many homes in Africa are not connected to electricity grids.
Paul Scott Matthew, Director Africa, North Star Alliance, South Africa
In the 1990s, Paul Matthew saw the alarming impacts of HIV/AIDS on mobile workers such as truck drivers and realized these workers lacked access to basic healthcare. North Star Alliance provides mobile workers and related communities with continual access to high-quality health and safety services through a network of interlinked clinics known as “Roadside Wellness Centres”. Since opening its first centre in 2005 in Malawi, North Star has grown to 22 centres in 10 countries.
Andrew Muir, Executive Director, Wilderness Foundation, South Africa
The Wilderness Foundation, founded in 1972, integrates conservation programmes with social and educational work. It has trained thousands of youth to be community leaders and national park rangers and more than 100,000 disadvantaged/vulnerable youth have benefitted from the Wilderness Foundation through its social intervention and environmental education programmes. The stewardship of the Wilderness Foundation has rehabilitated over 200,000 hectares of African wilderness and these areas are being expanded in the interests of conservation and environmental protection.
Seri Youlou and Thomas Granier, Co-Founders, Association la Voute Nubienne, Burkina Faso
Seri Youlou, a farmer from Burkina Faso, and Thomas Granier, a French mason, built a Nubian vault home in Burkina Faso over 10 years ago. By training farmers in the construction of homes with vaulted earth-brick roofs, the association provides an affordable, ecologically sustainable housing alternative and source of income to farmers during the off-seasons. Today, more than 200 masons have built over 1,300 Nubian vault homes in West Africa.
Hilde Schwab, Chairperson and Co-Founder of the Schwab Foundation for Social Entrepreneurship, commented in a press release: “Africa has seen tremendous growth over the past decade. Social entrepreneurs use innovative approaches to extend access to healthcare, education, energy and housing to marginalized populations that may not otherwise be included in the traditional markets. They ensure that growth, such as that experienced in Africa, is and will be inclusive.” Social entrepreneurs implement innovative and pragmatic solutions to social problems by tackling the root causes and creating social transformation
The Schwab Foundation was founded in 2000 and has been identifying the world’s leading social entrepreneurs in over 40 countries around the globe.
April 27th, 2012 by Tom Minney
The Nigerian Stock Exchange says it will have the fastest trading system in Africa when it upgrades its trading to NASDAQ OMX Group’s X-Stream platform, with a target date of second quarter of 2013. The new system will handle a wide range of instruments, accounts will be accessible from smart-phones and it will enable the NSE to host other exchanges’ trading platforms.
Previously the NSE was automated with NASDAQ’s Horizon system. The new platform is part of the wider reforms being carried through by CEO Oscar Onyema, some of which were initiated by the previous interim administrator Emmanuel Ikazoboh. Reuters reports that reforms to the market include allowing covered short-selling and extending trading hours. The news agency reports that exchange officials said that the new trading system will build confidence in the market’s transparency and adds that analysts expect the market to end 2012 with gains.
The signing ceremony was held on 24 April, chaired by CEO Onyema and Adeolu Bajomo, (Executive Director, Market Operations and Technology) from the NSE, and for NASDAQ Sandy Frucher, Vice Chairman of The NASDAQ OMX Group and Lars Ottersgard, NASDAQ senior vice president and head of technology. The NSE and NASDAQ OMX have been working on designs since September 2010. Frucher said that the surveillance system has been integrated into the trading system while Ottersgard was reported as saying the latest edition of the X-stream technology matches orders in under 100 millionths of a second.
According to a report in This Day newspaper, Onyema described the new platform as high-performance, robust and scalable, multi-asset, multi-market matching trading engine: “The new trading platform will enable the NSE to have the fastest trading engine in Africa and investors, through their stockbrokers, will have real-time access to market prices, their portfolios and be enabled to execute market orders in near real-time from anywhere and on a wide range of devices including smart phones.”
Onyema noted that the new system would improve transparency and provide efficient price discovery in the market, among other benefits, stressing that investors in the market would benefit significantly from the system upgrade as it would afford them the opportunity to diversify their investment portfolio: “With this new system, equities, a fully functional bond market and exchange-traded funds (ETFs) will be accommodated in phase one of the project, while derivatives will be introduced in the second phase. The system will also enable the NSE to host other exchanges.” Several West African countries are discussing plans to open stock exchanges.
Bajomo said the process of selecting the system had been rigorous and that the NASDAQ OMX X-stream is used by 94 exchanges around the world. “We will work aggressively to go live with the Nasdaq platform by the second quarter of 2013, but this will depend largely on the preparedness of the other market operators.”
The price of the new platform is mostly quoted in the Nigerian press (for instance Daily Independent newspaper as US$2 million. A day earlier, This Day newspaper had put the cost at over $8.8m.
Other reforms: market makers, ETFs
Media reports (for example here) quote Onyema pointing to other reform targets, including a big rise in the number of listed companies, vibrant trading of those securities and a wider range of products: “As part of the strategic transformation of the exchange we set out last year to launch five products in five years and in December 2011, we launched the first exchange-traded fund in West Africa, the ABSA NewGold ETF. We are working on launching more products in the medium term and by 2013/2014, we plan to create an options market that will trade stock options, bond options and index options. This would be followed by a futures market in 2016 that will comprise currency futures and interest rate.”
On market liquidity, he said the exchange recently unveiled 10 market makers: “With this in place, we will soon start short selling and securities lending to further increase efficiency and liquidity in the market by making available securities where they are needed. These initiatives are a vital part of increasing the vibrancy, depth and competitiveness of the market. We have also put in place rules to allow companies to repurchase outstanding shares through a share buy-back process. This would facilitate the repurchase by a company of a portion of its outstanding issued shares. The aim is to improve shareholder value (ROA, ROE, EPS, P/E); meaning a companies that feel their share prices are undervalued may engage in share buy-back to shore up the prices while also reorganizing their capital structures.”
Reportedly the NSE aims for market capitalization of $1 trillion by 2015 and to be “the gateway to the African markets”. According to an earlier report in This Day newspaper the 10 stockbroking market makers were selected from a list of 20 applicants. They include: Stanbic IBTC, Renaissance Capital, Future View Securities, Vetiva Capital, ESS/Dunn Loren Merrifield, WSTC Financial Services, Capital Bancorp, FBN Securities, Greenwich Securities and CSL Stockbrokers. Onyema said: “The companies selected went through a very rigorous process and met the minimum net capital requirement of N570 million ($3.6m). We also examined their compliance history and looked into their operational capabilities, including their technology and processes.” He added the firms were trained, debated the appropriate market structure and the Securities and Exchange Commission approved the selection. The market makers used a draw to select a basket of quoted companies in which they would provide the desired level of liquidity.
April 24th, 2012 by Tom Minney
A new securities exchange in Lusaka (Zambia) is installing tried-and-tested bond and derivative trading software and says it will be ready to launch operations next month, May 2012. BaDEx has trading platforms that include spot and derivative trading in bonds, currency, commodities (such as derivatives on metals and silo certificates on the spot market) and a variety of other derivatives including agricultural commodities, precious metals, equity and energy.
There is also a central scrip depository system (CSD) with a separate core management, risk solution, surveillance and settlement systems and platforms. The CSD will apparently link to CSDs in South Africa, Europe and the US and with the central Bank of Zambia’s real-time gross settlement system.
BaDEx, also known as Bond and Derivatives Exchange, reports that it was licensed by Zambia’s Securities and Exchange Commission on 1 January 2012 and the licence covers all securities under the Securities Act – bonds, equity, derivatives and commodities. It has signed a contract effective 12 March with South Africa’s STT (www.sttsoftware.co.za, which has also provided the JSE’s bond trading software for many years), for STT to immediately deploy trading, clearing, settlement and surveillance systems, and systems for auctioning government securities that will be suitable for the central bank, among others.
Dominic Kabanje, CEO of BaDEx, told AfricanCapitalMarketsNews that the exchange is a public-liability company owned by “banks, pension funds and private companies including the major securities dealers in Zambia”. He says they started with 6 local stockbroking members (approach stockbrokers Madison Asset, Integral Initiatives, Intermarket Securities, Laurence Paul Investment Services, Pangaea Renaissance, African Alliance Securities for more information) but are also looking for remote members, working with a South African merchant bank.
Mr Kabanje said they are now doing primary listings. BaDEx will start secondary trading using an online, Internet-based platform when the systems go live and are also seeking to partner with an international clearing house. In a press release he said they had been excited for 18 months: “We are glad to have finally concluded and signed the contract with our software systems vendors. STT applications have been tried and tested in the South African financial markets at the Johannesburg Stock Exchange (JSE), who have used this software for the past 18 years.
“We are currently setting up a network of domestic and foreign-based settlement banks, local and remote foreign members and dealers, institutional underwriters, a clearing house as well as primary panels of domestic, regional and international investors. We plan to link up all willing domestic and regional banks, institutional investors, pension funds, treasury departments, the local central bank, the government debt management office and the local member brokers to our system by providing interfaces and online access to our platforms.
“We will also shortly join the international community of CSDs in South Africa, Europe and the United States initially to facilitate faster and smoother clearing of international securities transactions. The applications from STT and others will enable us to do this and in addition will allow us to compete internationally for bond and derivatives business”.
“I do not see any obstacles from the Zambian side for companies wishing to list. Even SA companies can list on BaDEx. We want Zambian companies to dual list on JSE and BaDEx. At BaDEx we are implementing SADC protocols on the free-trade area as well as enhancing intra-regional trade. An exchange is one such conduit for regional trade. We will, however, have to deal with the problem of exchange controls in SA.”
Michelle Janke, STT’s Managing Director, said the company was happy to reach further into SADC: “We have worked closely with the executives of BaDEx for more than a year, and the closely formed relationship will stand us in good stead over the coming months whilst we deliver all the software applications and prepare the new securities market in Zambia to go live. We hope that in due course through an ongoing cooperation between BaDEx and regional merchant banks we can assist in transforming Lusaka into a key financial hub within the SADC region. We will be there to make this happen operationally.”
Products to be traded include: corporate bonds, municipal bonds, currency futures and options, interest-rate derivatives (including swaps), equity derivatives and commodity derivatives on underlying copper, cobalt, gold, oil, wheat, soya and maize spot markets, bond derivatives market, spot bond market, spot and currency derivatives market, commodities derivatives (including metals) and the commodities spot markets (with silo certificates), agricultural derivatives market, spot equity and equity derivatives markets, precious metals derivatives market and energy derivatives market.
March 8th, 2012 by Tom Minney
The first offshore company was approved to be listed for trading on the Stock Exchange of Mauritius (SEM). The company has a Global Business Licence Category 1, which is more stringent than GBL 2, and the listing is in line with a new Chapter 18 of the regulations. The Financial Services Commission of Mauritius licences global business sector companies.
The listing of the ordinary shares of Evisa Investments Limited was approved on 28 February for the SEM’s Official Market. Evisa is a holding company and its primary investment is in Cannon Assurance Ltd, a company incorporated since 1967 in Kenya. Evisa has 1,000,000 Ordinary Shares of US$5.45 each in issue. Its main objective is to provide its shareholders with dividend income and long-term gain through expanding and diversifying its investments.
Chapter 18 addresses specific requirements for corporations holding a GBL 1 licence and certain types of debt instruments targeted to special categories of investors, including “expert investors”, as defined in the Securities (Collective Investment Schemes and Closed-end Funds) Regulations 2008.
According to a press release, the listing of GBL 1 companies is in line with SEM’s internationalisation strategy, and fosters the development of synergistic links between the Global Business Sector and the Stock Exchange of Mauritius. It also fits with the overall objective of positioning Mauritius as a jurisdiction of substance.
The SEM was incorporated in Mauritius on March 30, 1989 under the Stock Exchange Act 1988, as a private limited company responsible for the operation and promotion of an efficient and regulated securities market in Mauritius. Since October 2008, the SEM has become a public company, and over the years the Exchange has witnessed a significant overhaul of its operational, regulatory and technical framework to reflect the changing standards of global stock markets. Mauritius is well poised to become a leading base for funds investing into Africa from all over the world, including from India and China and there is potential for more listings.
SEM is today one of the leading Exchanges in Africa and is a member of the World Federation of Exchanges, the South Asian Federation of Exchanges, the African Securities Exchanges Association and the Committee of SADC Stock Exchanges. SEM is an Approved Stock Exchange by the Cayman Islands Monetary Authority and a “Recognised Stock Exchange” by Her Majesty’s Revenue & Customs in UK.
Evisa is a public company limited by shares, incorporated on 16 May 2002 and licensed by the FSC to operate as a GBL 1 company. The company secretary and registered office address of Evisa is International Management (Mauritius) Limited, Les Cascades Building, Edith Cavell Street, Port Louis.