Archive for the 'Integration' Category
October 22nd, 2010 by Tom Minney
Interest is building fast ahead of the upcoming African Stock Exchanges Association (www.africansea.org) meeting, to be held from 10-12 November in Livingstone and hosted by Zambia’s Lusaka Stock Exchange (www.luse.co.zm).
The theme is “Integration of the African Markets Through Technology”. Every year, this is the leading annual event on African capital markets and this year promises to be dynamic, as ASEA has new leadership and there is a huge wave of interest for investing into Africa which African securities exchanges need to prepare for urgently.
On the agenda are steps to integrate African markets and drive the liquidity and efficiency that domestic and international investors urgently need. Technology is likely to be at the forefront of the discussion, as elsewhere in the world as capital markets step up the rush for precedence.
A key player is Sri Lanka’s MillenniumIT, bought in 2009 by the London Stock Exchange. MillenniumIT CEO Tony Weerasinghe, who is the LSE’s Director of Global Development, will be at the conference to speak on “Creating a pan-African hub, for seamless trading, clearing and settlement.”
Other topics include:
• Drivers of liquidity
• Cross-border settlement
• Regional integration opportunities and challenges with experience from the East African Securities Exchanges
• Bond markets
• Perspectives from leading fund managers and stockbrokers investing into Africa
• Investor protection and capital markets governance
• Investor education (Maureen Dlamini, JSE)
• Role of technology and IT solutions
• South Asian Federation of Exchanges [SAFE]
• Harmonization of the financial sector and capital market development
There will also be chance for fun, cruises and lots of networking.
For the agenda click here, and for more details and registration click here (on www.luse.co.zm).
October 22nd, 2010 by Tom Minney
Technology is the driver of securities exchanges around the world – currently there are big battles for supremacy in a range of markets and disclosure and clearing and settlement after the trade are also coming to the fore. Africa should be no different.
The continent is peppered with small national stock exchanges with too little liquidity to attract significant large investors (domestic and foreign) or to be cost-effective as a way to raise finance. However, in most cases a country will not agree to close its stock exchange – sovereignty can trump the desire for effective and liquid markets. It can also be important that financial institutions and intermediaries should be regulated locally.
A central technology provider for Africa’s markets is MillenniumIT (www.millenniumIT.com), a Sri Lankan group that offers a wide range of stock exchange systems including trading, central depositories and order routers. Last year the company was acquired 100% by the London Stock Exchange Group (www.londonstockexchange.com) for $30 million which seemed to confirm that LSE regarded MillenniumIT as a world leader.
The LSE-owned Turquoise multilateral trading facility went live with Millennium Exchange trading system on 4 October 2010 and the main SETS book will go live from 1 November. The Linux-based systems are set to be much faster and cheaper. MillenniumIT says its system is scalable from 1,000 orders/second to 1,000,000 orders/second – some African exchanges have not seen this many orders in a decade.
According to a press release at the time of the LSE Group purchase: “MillenniumIT’s high-performance technology will provide the Group with a highly scalable and very low latency in-house developed trading system with multi-asset class functionality and quicker product speed to market. In addition, the transaction will give MillenniumIT the backing of the Group to enable it to develop further its global exchange technology business.
Big players switch
Africa’s biggest exchange, South Africa’s JSE Ltd (www.jse.co.za), has long used the LSE TradeElect trading system and the Namibian Stock Exchange (www.nsx.com.na) trades on a special board set up on the JSE’s trading system. According to a JSE presentation last June it plans to go live in April 2011 with Millennium Exchange, and discussions continue on this.
MillenniumIT has also supplied trading systems to the securities exchanges in Kenya, Mauritius, Tanzania and Zambia, and central depositories and settlement systems in Botswana, Ghana, Kenya, Tanzania, Uganda and Zambia, among others.
The dynamic Stock Exchange of Mauritius (www.stockexchangeofmauritius.com), among the continental leaders in IT, has long promoted MillenniumIT trading and central depository systems. In addition to powering its own markets, SEM has also advocated them on other projects in which it has been involved, such as a central African regional exchange (which did not end up using Millennium IT), also Nairobi, Dar es Salaam, Botswana, Lusaka and the Bank of Ghana CSD.
In particular, MillenniumIT’s Smart Order Router system could support the hub-and-spoke model that is adopted by the Committee of SADC Stock Exchanges. Preparations are done and this is ready to move fast once funding is approved. The model can allow exchanges to continue to regulate their brokers and other institutions, as orders can be routed through local broking houses.
MillenniumIT also won the project for linking the East African Securities Exchanges and helping solidify the East African common market for capital but this too is awaiting funding.
Jit Seneviratne, Head of Business Development, told AfricaCapitalMarketsNews: “MillenniumIT sees a major role for itself in integrating African capital markets and we will use our technology to facilitate this. It certainly helps that we are already powering several exchanges in Africa… We have already identified the manner in which the links can be done.
“The only challenge if at all, is not in the trading but the clearing and settlement of pan African securities, but we have a plan for this as well.”
African IT implementations
The Sri Lankans said they designed and implemented the DSE system in 3 months going live successfully in September 2006. In 2008, Millennium systems successfully handled East Africa’s biggest IPO, after 750,000 people applied for Safaricom shares. Nairobi brokers remain enthusiastic about the NSE system, successfully implemented on 11 September 2006 after a 5 month period to develop, test and implement this system. The company press release quotes Chris Mwebesa, then Chief Executive Officer of the NSE, saying : “In the first day alone the difference in moving from a manual system to an automated trading system has given us astounding results. On September 11 when the system went live we had 3,761 trades compared to 759 trades recorded on September 12 2005. This is a very encouraging start.”
The company’s trading system for Zambia’s Lusaka Stock Exchange went live successfully in November 2008. It has been providing Lusaka’s central depository since the exchange opened under International Finance Corporation technical assistance in 1994. Although trading at the Ghana Stock Exchange uses another system, Infotech, the central securities depository of the Bank of Ghana is also powered by Millennium since 2004, and there are talks of further mergers in West Africa. Before being terminated in August, the former Director General of the Nigerian bourse said it was time to upgrade their systems.
Millennium provided a central depository and settlement system for the Botswana Stock Exchange which went live in August 2008. At the time, Millennium announced that the BSE can handles equities found in domestic, foreign and venture boards, corporate and Government bonds and commercial paper. Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com – USE and DSE also have shareholding) has offered services to Zimbabwe and has won a tender to act as registrar for the initial public offer of brewer BRALIRWA on Rwanda’s over-the-counter market.
There have been decades of talking and no action about ways to pool liquidity and facilitate more market efficiency, while the securities markets have failed to play their full role in Africa’s development. Now it could be that a solution is already in place and at people’s fingertips and the JSE and the rest of Africa could suddenly also happen to be on the same technology page. The challenge is for the policy-makers and strategists of Africa’s markets to turn this into reality. The upcoming African Stock Exchanges Association annual meeting (10-12 November) could be a good start.
BACKGROUND: According to the company:
MillenniumIT was founded in 1996. It employs 500 people, in 3 divisions – Proprietary Software Products, Enterprise Services and Exchange Operations. Its corporate HQ and Software Development is located in Colombo, Sri Lanka.
MillenniumIT systems are used by ICAP, the London Metal Exchange, and a series of emerging market exchanges and depositories and have been previously deployed at the American Stock Exchange and the Boston Stock Exchange.
MillenniumIT’s suite of capital market products includes Millennium Exchange (multi-product trading platform), Millennium SOR (smart order router), Millennium Surveillance (market surveillance and regulatory compliance system) and Millennium CSD (integrated clearing, settlement and depository functions).
Millennium IT is a sponsor of the 2010 ASEA conference in Livingstone, Zambia. Tony Weerasinghe, CEO of Millennium IT and Director of Global Development, LSE, is on the ASEA conference agenda to speak on “Creating a pan-African hub, for seamless trading, clearing and settlement.”
October 15th, 2010 by Tom Minney
Next month’s upcoming African Stock Exchanges Association conference (10-12 November, Zambia) could be a key event in shaping the future developments of African securities exchanges.
There will be scope for important interviews and news, blogged live from the conference meeting in Livingstone, Zambia and giving the world insight into running news of Africa’s booming securities exchanges for bonds and equities, as well as private equity and social impact investment.
Your organization could support the coverage and be at the forefront of the news. We are offering top billing advertising space on our widely-read blog and will use the money raised to support attending ASEA and to widen and deepen our high-quality coverage of Africa’s capital markets (currently written by a volunteer capital markets professional, see about us).
This is a key opportunity for your investment institution, bank, stockbroker or other company if you want to be identified as THE important role player shaping the future of investment on the world’s new frontier.
Interested advertisers are invited to bid for 1 month’s advertising on this blog, expected to start from a minimum of $500 per month. The top 2 or 3 may be accepted. We will also make sure you get well recognized in the ASEA coverage. The bidding closes on 22 October.
Please send bids by email to tom.minney[at]afrigrow.com.
September 8th, 2010 by Tom Minney
Rwanda’s capital market regulator told Bloomberg newsagency on 7 September that it had approved the cross listing of shares in Nation Media Group Ltd. (www.nationmedia.com), East Africa’s biggest media company, on Rwanda’s over-the- counter (OTC) securities market. Robert Mathu, executive director of the Capital Market Advisory Council (CMAC – www.cmac.org.rw) reportedly said: “We approved on condition of fulfilling pending things like submitting an information-disclosure document. They could cross-list toward the end of this month.”
Nation Media will be the second company to trade on the Rwandan OTC, and is one of 4 cross listings expected, as reported previously. Kenya Commercial Bank Ltd. cross-listed its shares in 2009. Six bonds also trade on the Rwandan market, including a two-year, 2.5 billion-franc ($4.3 million) security sold last month, according to the Rwandan central bank. A combined 21.5 billion Rwandan francs has been raised through bond sales on the Rwandan market since 2008, according to CMAC data. On average, about 8,400 shares currently trade on the Rwandan market every month, generating turnover of 1.4 million francs, according CMAC data cited by Bloomberg.
Nation Media is owned by the Aga Khan Fund for Economic Development SA. Its primary listing is on the Nairobi Stock Exchange and the company announced plans in March to list in Rwanda, Tanzania and Uganda.
“Nation Media’s listing gives investors in Rwanda an opportunity to participate in the leading media company in the region, and gets Rwanda to participate in regional integration of East Africa’s capital markets,” Mathu said. “It is a small market, but promising to grow. We expect an initial public offer by BRALIRWA from the private sector this year.” The listing of Brasseries et Limonaderies du Rwanda SA (BRALIRWA) as reported previously on this blog would be a major event. The Government plans to offer 25% of BRALIRWA to public investors and to sell 5% to Heineken NV, which earlier bought 70% of the shares from the Government.
July 15th, 2010 by Tom Minney
From when trading started at 10am last Sunday, 11 July, NASDAQ Dubai (www.nasdaqdubai.com) is routing all trades in its listed equities through the trading platform of Dubai Financial Market (DFM – www.dfm.ae). NASDAQ Dubai is one of the leading exchanges contesting the crown of financial centre of the Middle East and North Africa, and also has potential for channeling investments into African countries.
Trading for the first few sessions this week was reported to have gone well and several brokers were said to be inquiring about membership.
NASDAQ Dubai describes itself as: “the international financial exchange serving the region between Western Europe and East Asia. It welcomes regional as well as global issuers that seek regional and international investment. The exchange currently lists shares, derivatives, exchange-traded commodities, structured products, Sukuk (Islamic bonds) and conventional bonds.”
The move has been prepared since last December, and is part of a consolidation between the exchanges and aiming to boost liquidity on NASDAQ Dubai. Essa Kazim, Managing Director and Chief Executive Officer of DFM, said in a press release: “Cooperation between the two exchanges will increase, driving the expansion of Dubai as a centre of capital markets dynamism and innovation. Today’s outsourcing is a major step for us and the region. Through these growing links, DFM gains a wider array of product offerings and international expertise, while NASDAQ Dubai benefits from DFM’s high liquidity and enormous base of over 552,000 investors.”
Clearing, settlement and custody functions for NASDAQ Dubai equities also migrated to DFM’s systems on 11 July under an outsourcing agreement. Jeff Singer, Chief Executive of NASDAQ Dubai, said: “This new structure brings together more than half a million individual investors on DFM with NASDAQ Dubai’s institutional investors, many of them based outside the region. It positions Dubai as a leading international capital markets hub, providing investors with excellent liquidity and issuers with a choice of regulatory frameworks.”
In May 2010 DFM acquired two thirds of the shares of NASDAQ Dubai through an acquisition of shares from Borse Dubai and NASDAQ OMX, the international exchange group. Borse Dubai still owns one third of the shares. NASDAQ Dubai remains a separate exchange regulated to international standards by Dubai Financial Services Authority (DFSA), which gave approval for the outsourcing last week. DFM is regulated by the United Arab Emirates’ Securities and Commodities Authority. NASDAQ Dubai remains a separate company inside the Dubai International Financial Centre (DIFC). It retains its own legal framework, listing rules and Members.
DFM and NASDAQ Dubai equities are now displayed together on the DFM website www.dfm.ae. NASDAQ Dubai equities also continue to be displayed separately on the NASDAQ Dubai website www.nasdaqdubai.com. Brokers who are members of NASDAQ Dubai access the DFM trading platform either directly, or through NASDAQ Dubai’s Market Place Services function, or through another broker.
Under the outsourcing, NASDAQ Dubai’s equities remain listed on NASDAQ Dubai and are not listed on DFM. Trading of equity derivatives continues to take place on NASDAQ Dubai’s own trading platform and systems.
NASDAQ Dubai’s opening hours are now 10am to 2pm UAE time (6am to 10am GMT) Sunday –Thursday. These are also DFM’s opening hours. Previously, NASDAQ Dubai’s opening hours were 10am to 5pm UAE time (6am to 1pm GMT) Sunday-Thursday.
June 9th, 2010 by Tom Minney
Rwanda’s Capital Markets Advisory Council (www.cmac.org.rw) expects 4 more Kenyan cross-listings this year on the Rwanda Over The Counter market, which is run by CMAC, bringing the total to 5, according to a report in The New Times newspaper (www.newtimes.co.rw).
Robert Mathu, the Executive Director of CMAC, is reported as saying that the Nation Media Group (www.nationmedia.com) has made a formal approach and mentioned it in their annual report, and the CMAC also expects interest from Equity Bank, Kenokobil and TPS Serena. The companies are already doing business in Rwanda and elsewhere in Eastern Africa.
He is reported as saying: “This means a lot for the Rwandan market as it gets more products and increases the capital markets standards of trading as well as the infrastructure to make it easy for investors to invest.”
The companies also plan to cross list on other regional markets as the East African markets move to much closer integration. Mr Mathu said that cross listing is not about raising new capital and the companies will offer 100% of their shares to Rwandan investors at the trading prices on the Nairobi Stock Exchange (www.nse.co.ke).
The first cross-listing is Kenya Commercial Bank. The big step for this year would be teh first local Initial Public Offering for brewery BRALIRWA, covered on this blog in February.
April 1st, 2010 by Tom Minney
Fears of the potential impact of IT disruption on African capital markets, combined with a long-running initiative to pool fragmented markets for more liquidity, led to a shock decision by the African markets association today to switch to a single African market platform at short notice.
The pioneering African Securities Markets Association market body says that all markets should be closed by 12 noon today(Thursday), while trading on the new platform is expected to start with effect from 9am on 6 April, giving traders and market institutions a very busy long weekend to set up alternative infrastructure.
“The main aim of the new system, called FITS, is to ensure that we can go on trading shares, bonds and other securities despite any possible terrorist attacks or power cuts”, said Bernani Madofo, IT spokesperson for ASMA, said in a news release: “At the same time, we are taking the chance to combine all markets in one trading pool, and at a stroke eliminating the small and fragmented markets that have been harming efficiency and capital raising in our great continent”.
The new system will revolve around a return to floor trading in a single African location. All securities, including bonds, shares and derivatives, will be listed on electronic screens, and traders will set up offices nearby before heading down to the trading floor. Traditional trading systems including verbal and physical transactions, backed up by prompt data entry, have frequently been shown in leading research studies to be more effective for trading, turnover and market pricing efficiency than expensive computer systems. Broker Japie Enroni said of his former trading screen “It’s like watching paint dry, I’d love some action”.
After hurried debate, in a shock electronic ballot the ASMA membership voted to set up the new exchange in the International Conference Centre, Seychelles are now busy setting up offices in IT enabled locations such as Club Meditrade and five star hotel Le Bigroller, while working around the clock to gearing backoffices for settlement and clearing using the revolutionary Fun In The Sun (FITS) integrated “umbrella” client and trade settlement system using L-ounger software.
Extra liquidity is likely to be gained after trading hours as Africa’s tens of thousands of stockbrokers gather in local hostelries to prepare their throats for the next day’s trading action.
March 16th, 2010 by Tom Minney
Sunil Benimadhu, Chief Executive Officer of the Stock Exchange of Mauritius:
We have had lots of discussion on how to link different markets. Lots of work has been done from a technical standpoint. We will keep national exchanges as they stand and enable their members to reach the members of different exchanges. Technically it is possible, now we need to raise the financing and also to be clear that the investment will need to make sense in terms of flows from increased traffic.
In order to get more liquidity, we need to increase the free float, currently many companies have requirement of 20% free float but even that may not be available for trading, for instance controlling shareholder may still sit on a big shareholding and keep it from trading.
March 5th, 2010 by Tom Minney
Imara Holdings Ltd (www.imaraholdings.com), an investment banking and asset management group with operations in 10 countries mostly in southern Africa, aims to expand in Zimbabwe, according to Zimbabwe’s Herald newspaper. It is currently listed on the Venture Capital Market board of the Botswana Stock Exchange (www.bse.co.bw) and the Herald reports that it wants to buy the rest of the shares in Zimbabwe’s Imara Capital Zimbabwe (Pvt.) Ltd (www.imaracapital.com), which it owns 32%, and also to dual list on the Zimbabwe Stock Exchange (www.zse.co.zw).
The report says that Imara Holdings has proposed a share deal in which local shareholders and the management will get a shareholding in the parent in return for their shares in the local company. The dual-listing on the bigger exchange could make the shares more liquid and the dollar-based ZSE is attractive to international investors. Imara management reportedly refused to comment, possibly while the transaction is under approval by authorities.
Imara Holdings website does not mention the transaction, although it has been publishing cautionary announcements since 31 July 2009. It describes the group as “medium sized”. It has offices in Botswana, Malawi, South Africa and the UK, and associate offices in Malawi and Zimbabwe as well as working relationships with Stockbrokers Zambia, Namibia Equity Brokers and Mac Capital in Dubai.
According to the Holdings website: “We are independent and privately owned, enabling objective decision-making in the service of our clients. We are active participants in the region’s financial markets and maintain one of the largest research coverage of regional equities. Funds under management exceed US$ 135m and funds under administration exceed US$750m.”
Imara group services fall into three primary operating areas:
• Corporate Finance & Advisory Services
• Institutional and Private Client Asset Management
• Securities Trading
Imara Capital is one of the associates listed in Zimbabwe, others being listed on the website as Imara Edwards Securities (Pvt) Ltd, Imara Asset Management Zimbabwe (Pvt) Ltd and Imara Corporate Finance Zimbabwe (Pvt) Ltd. The Herald report says these are wholly owned by Imara Capital.
On 8 January Imara signed a licence agreement to become the 7th member of Global Alliance Partners (www.globalalliancepartners.com), of which Mac Capital Dubai is already a member. Bernard Pouliot, chairman of GAP and of the Quam Group based in Hong Kong, said Imara joins the alliance at a very opportune time when Chinese interest in Africa is growing: “Imara is good for the alliance and for China. Alongside other members of GAP, we are committed to hit the ground running when an umbrella investment scheme by African countries is developed and eventually implemented.”
The other GAP members are Quam Financial Services Group for Hong Kong and China, Capital Partners Securities for Japan, KT ZMICO for Thailand, Thanh Cong Securities Company for Vietnam, and Westminster of Hudson Securities in USA.
In December, Imara Holdings announced it had recently acquired a majority equity stake in the Botswana stockbroking company Capital Securities (Pty) Ltd., one of 4 licensed stockbrokers on the Botswana Stock Exchange, established in March 1999.
“Shareholders are advised that negotiations relating to a further regional acquisition, which was announced in a Cautionary Announcement published on 31 July 2009 and in subsequent renewal announcements, are still ongoing. Shareholders are therefore urged to continue to exercise caution in their dealings in Imara securities,” says the Botswana announcement published in December.
February 21st, 2010 by Tom Minney
According to Zimbabwe’s Herald newspaper (www.herald.co.zw), it is only months before the introduction of a hub-and-spoke interconnectivity model for SADC stock exchanges as “the first significant step towards the integration of one of Africa’s economic regions”.
According to reports, stockbrokers have sought a vehicle to provide information on companies operating in the region, monitor their performance and explore opportunities for clients. Geoff Rothschild, Director: Government and International Affairs at South Africa’s JSE Ltd (www.jse.co.za) and outgoing chair of the Committee of Southern Africa Development Community Stock Exchanges (COSSE), grouping 10 southern African bourses, is quoted as saying the system would “expose our neighbours’ business organisations to local and international investors. This hub will allow exchanges to connect to each other’s platforms and ultimately allow investors to trade on all SADC exchanges through their local brokerage.”
Major investment is needed to upgrade technology for the region’s exchanges and, although many are willing, financing is still being sought. The hub-and-spoke model is being developed by the Mauritius securities market, including the Central Depository and Settlement company, which has experience of capital markets development in other parts of Africa.
Zimbabwe Stock Exchange Chief Executive Emmanuel Munyukwi has been elected chair for the next 2 years. Lusaka Stock Exchange chief executive Mrs Beatrice Kansa is deputy chair. Mr Munyukwi, a former banker, is quoted as saying: “The position will help to put Zimbabwe back on the regional securities map and also enhance the visibility of ZSE to investors.”
CoSSE was established in 1997 and meets quarterly, its members with established exchanges are: South Africa, Namibia, Botswana, Mauritius, Mozambique, Swaziland, Tanzania, Malawi, Zambia and Zimbabwe. Its objectives include increased co-operation and links in operations, communications, regulations, technical skills development and other areas between the stock exchanges and to make SADC securities markets more attractive to local and international investors.