UGANDA - STOCK MARKET READY FOR COMPUTERISED TRADING
The stock exchange in Kampala is to end issuing of paper certificates to investors in the capital market late this year by introducing electronic accounts.
The electronic accounts will be held under what is termed; the Central Depositary System (CDS), a computerised system that facilitates faster and easier processing of transactions for shares and bonds.
CDS attracts both local and international market participants. CDS account holders have up-date-information on their holdings and the convenience of electronic securities transfers to facilitate trade settlement.
Japheth Katto, the chief executive officer Capital Market Authority, told Daily Monitor on November 11, at Imperial Resort Beach Hotel that the CDS electronic system will replace the practice of holding and moving physical scrip of quoted shares with an efficient and dependable computerised book entry system.
"Consideration has been given to linking payment systems in the East African Community to the CDS system to form an integrated payment, clearing and settlement frame, automated trading system," Katto said.
He said in the medium term priorities, the proposed CDS system would focus on broker-to-exchange-to-depository linkages and broker-to-customer linkages as well as a virtual communication network among the three exchanges namely; the Nairobi Stock Exchange, Uganda Securities Exchange and the Dar-es-Salaam Stock Exchange.
While presenting a paper titled: "Performance of Capital Market in East Africa" Katto said the markets in East Africa should be linked to more developed markets in Africa and beyond.
The Central Depository System (CDS) Act was passed by Parliament in July 2000 in Kenya and since then, the liquidity in its market capital, according to Katto, has more than doubled because its flexible to the investor as they do not have to wait to be issued with paper certificates that may take weeks.
Holders of CDS enjoy the benefits of reduced cost and risks associated with the environment where holding and moving physical scrip has been the norm.
Observers say the success of regional integration will depend on finding solutions to key country- level problems. This implies that consistent and assured political backing of the EAC authorities will be crucial for capital market integration to materialise.
"The observed diversity in the three could be a source of regional strength as they can capitalise on complementarities," said Kato.
The size of stock and bond markets in Kenya amounts to $6,083.00m, Uganda has $1,895.00m and Tanzania has $2,316m, while South Africa has $442, 526m. Kenya equity listings is the biggest with 48 companies in its 48 years of existence, Tanzania has eight companies in nine years and Uganda has seven over the last nine years.