The Southern African Development Community integrated stock markets offer good lessons for the East African Community as it seeks to integrate its stock exchanges via a suitable interconnectivity window.
This was laid bare at a meeting of capital markets experts held in Kampala recently.
The SADC operates a shared model that makes it possible to procure affordable digital operating platforms and reasonable sharing of commissions between stockbrokers.
Under this model, a stockbroker who refers an equity trade to a colleague based in a participating stock exchange receives 33.3 per cent of the commission earned from the stock trade. The balance is allocated to the stockbroker that actually executes the trade.
In comparison, disagreements over technological issues have significantly slowed down integration of East Africa’s stock markets trading platforms, compounded by funding gaps.
According to Paul Bwiso, the chief executive officer of the Uganda Securities Exchange; “Our stock markets are in different stages of development and this makes system integration more difficult than expected.
“While Uganda and Tanzania’s stock exchanges appear more compatible with each other based on results of trades done in the past, Rwanda’s stock exchange shares a CDS platform with the central bank in a very entrenched arrangement,” he said.
“Kenya’s securities exchange operates an internal CDS platform separate from that of the central bank while Burundi is yet to establish an exchange. Due to divergent technological factors, the integration of the local stock market trading platforms across East Africa has been pushed to first quarter of 2020. But finding consensus on a trading revenue sharing ratio remains one of the biggest obstacles facing the stock market integration agenda,” he added.
In the SADC model, stock exchanges hosted by member states enjoy access to discounted prices for advanced but expensive technological platforms by leveraging on the Johannesburg Securities Exchange’s economic muscle.
Johannesburg is Africa’s largest stock exchange, with a market capitalisation of more than $150 billion—bigger than East Africa’s individual economies—and has more than 300 listed companies on its trading board.
MoUs between stockbrokerage firms in EAC countries may help drive future consensus on a viable trading revenue sharing ratio.
“Equity Stockbrokers Ltd of Uganda signed an MOU with Dyer and Blair Investment Bank of Nairobi for cross border equity trading and sharing of commissions in 2008. Most of the clients serviced under that MoU were signed up during the Safaricom IPO,” said Edward Ruyonga, an equity dealer at the USE. Discounted prices “Under that MoU, Dyer […]