Capital Markets Authorities in East Africa plan to link up their stockmarkets in a move that will enable real time trading activities across the region.
Celestine Rwabukumba, the chairperson of the East African Securities Exchanges Association and the chief executive of the Rwanda Stock Exchange said the plan is to integrate the financial sector through smart-order routing technology in the next six months at a cost of $2.6 million.
Smart-order routing is a service that helps traders seek out the prices across a range of competing exchanges.
“The model of integration that East Africa has adopted is linking the existing stock exchanges, central depositories as well our legal frameworks to enable companies raise capital from across borders, and investors to choose from a wide range of products,” Mr Rwabukumba said at the Capital Authorities meeting held in Kampala on July 24.
Mr Rwabukumba said the smart-order routing technology will be used to link the Dar es Salaam Stock Exchange, the Uganda Securities Exchange, the Nairobi Securities Exchange and the RSE to facilitate trading in the region.
While RSE is yet to be automated, it hopes to be so before year end to be able to join the regional platform, which will be hosted in Dar es Salaam, Tanzania.
The East African securities exchanges also plan to use a messaging platform to link the central depositories so that investors will be able to view each other’s holdings across markets.
Geoffrey Odundo, chief executive of the NSE, said the new initiative is coming at a time when regional markets are looking for ways to attract listings from small and medium- sized firms.
“We foresee the financial sector becoming more exciting. For instance, in Kenya, we have just seen increases in the banks’ capitalisation and there’s no easy way to raise such capital apart from listing on the stock markets,” Mr Odundo said.
Kenya’s National Treasury has increased the minimum core capital for commercial banks from $10.1 million to $50.54 million to be effected over the next three years to make its financial sector competitive.
Mr Odundo said securities exchanges across the region are currently educating the public about the importance of stockmarkets, and transaction aisors are talking to family businesses to open up for equity.
The NSE and DSE, which launched their alternative investment segments two years ago, are yet to post exciting performance as most privately and family-owned businesses are not willing to list on the stock market to public.
The NSE has only attracted four companies to the Growth Enterprise Market Segment (GEMS) since it was unveiled. The firms are Atlas Development and Support Services Ltd, Flame Tree Group Holdings Ltd, Home Afrika Ltd and Kurwitu Ventures Ltd.
On the other hand, DSE’s Enterprise Growth Market (EGM) has only two listings — Maendeleo Bank and Swala Oil and Gas (Tanzania) Plc — with four more firms expected to list this year.
Uganda’s stockbrokers have welcomed the regional initiative to link capital markets saying it will be convenient for investors wishing to trade across the region.
Present at the Kampala meeting were DSE chief executive Moremi Marwa, USE’s Paul Bwiso and Rose Mambo, the chief executive of the Central Depository and Settlement Corporation.
Currently, NSE has the highest number of listed companies, with 63 firms, followed by DSE and USE with 21 and 17 listed firms, respectively. The RSE has seven listed firms.