Money Markets
EA bourses adopt Kenya’s brokerage back-office system
Trading floor at the Nairobi Securities Exchange. The regional securities exchange association has borrowed the back-office model from Kenya as its members seek a common trading platform. Photo/File
Posted Monday, July 23 2012 at 19:24
East African Securities Exchanges Association (EASEA) has adopted Kenya’s automated broker back-office system as it develops an inter-depository transfer mechanism for cross-listed stocks.
The system, whose implementation started last year, will help interlink the trading of securities in the region as it seeks a common trading platform.
The association, which met at the end of last week, has said that the adoption of the broker back- office system as the regional standard would automate the entire process of transacting in securities with minimal manual intervention and be interfaced with the trading and settlement platforms.
The EASEA has been looking for ways to interconnect the trading of securities in order to make it easier for investors to access each other’s markets and the adoption of the broker system will now standardise part of the electronic systems in use.
“This system will reduce the risk of trading in securities listed on the regional exchanges, boost investor confidence and facilitate greater access by enabling Internet trading,” said a statement from EASEA adding that a proposed inter-depository mechanism will enhance the liquidity of cross-listed securities and make their movement efficient.
The association draws its membership from the Nairobi Securities Exchange (NSE), Dar es Salaam Stock Exchange, Rwanda Stock Exchange, Uganda Securities Exchange and Burundi.
Implementation of Kenya’s broker system, which is expected to cost Sh100 million when fully in place, started last year but not all brokers have fully adopted its use, citing data migration delays and other technical issues.
“I am aware that there some brokerage houses that have not yet fully implemented it but most have. These are mostly data migration issues which are technical issues,” said Job Kihumba, an executive director at Standard Investment Bank.
“At the end of the day we may end up saving some money (on implementation) because you will not need a big back office.”
Mr Kihumba said that a lot of centralisation had been going on particularly in the banking sector where consumers are now able to transact from other East African countries.
The NSE last year booked Sh46.371 million as the cost of acquiring and installing the software, according to the bourse’s latest annual report.
Previously, most brokers in Kenya were on a manual system.
“It will make trading in the region much easier. I think if they bring in more people, it will bring down the cost of maintenance. So, from a cost perspective it will also be easier,” said Samuel Wachira, general manager at Francis Drummond and Company noting that migration of data to the new system was taking time.
Mr Wachira said that some brokers were still running parallel systems noting that each agent pays a one-off fee of Sh2 million and a monthly maintenance charge of Sh120,000; adding that its implementation still needs to be completed in Kenya.
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