In view of the African Exchanges Linkage Project, African stock exchange managers have begun the process of acquiring a software that will link seven stock markets with a combined market capitalisation of $1.25 trillion electronically.
East African countries including Uganda, Tanzania and Rwanda are partnering with the World Bank-funded financial project to connect regional stock markets electronically and enable them to operate as a single market. When established, it would reduce the cost and time of trading in shares of companies listed on markets across the borders.
The software connection will be done by Pakistan-based InfoTech Private Ltd, who are in charge of the trading platforms of the Uganda Securities Exchange, Dar es Salaam Securities Exchange and Rwanda Stock Exchange.
This would enable Uganda, Rwanda and Tanzania to start trading as a single market before the end of the year, after interconnecting their trading systems and hooking to the EAC Capital Markets Infrastructure (CMI) Information Technology platform. Also, Investors in the three countries will buy and sell shares of companies listed in any of the countries without going through different stockbrokers.
Celestin Rwabukumba, the association’s chairman and Rwanda Stock Exchange CEO told The EastAfrican that the body is at its final testing stage for the CMI project. “We are ready psychologically and technically we are working on those technicalities that are remaining and everything should be ready by the end of this month and then we agree on the time of the launch which cannot go beyond December.”
African Exchanges Linkage Project began in 2016 as a joint initiative of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB), aimed at promoting cross-border trading and liquidity in African stock exchanges. The initial phase of the project involves connecting seven exchanges that control over 90 percent ($1.25 trillion) of the entire continent’s market capitalisation.
The EAC Capital Markets Infrastructure project is part of the World Bank’s $26.18 million project which was approved in March 2011 for the financial sector integration among the EAC member states ahead of the implementation of a single currency regime whose initial 2024 deadline is a subject of review.
The project consists of six components including integration of market infrastructure ($3.75 million), development of regional bond market Institution Building ($12.1 million) and Project Management ($1.1 million). Others include financial inclusion and strengthening of market participants ($4.3 million), harmonization of financial laws and regulations ($4.23 million) and Mutual recognition of supervisory agencies ($7 million).
Currently, Ugandan stockbrokers take the largest share of stock trading commission at 3.28 percent of the value of the transactions. Rwanda and Tanzania brokerage commissions on equity trading are regulated at 1.5 percent while in Kenya the applicable commission is limited to Ksh100 (1$) for odd lot transactions up to Ksh3,000 ($30) and 1.8 percent for odd lot transactions in excess of $30.