Nationalistic focus on country exchanges is not getting us anywhere.
Movies have been fairly represented in this column, but I’ll allow myself again to stick to the small screen and some famous questions. Who is John Galt (Atlas Shrugged)? What is the Matrix (Matrix)? “Did you ever dance with the devil in the pale moonlight” (Batman)?
“If you work for a living, why do you kill yourself working? (The Good, the Bad and the Ugly)? “How can the net amount of entropy of the universe be massively decreased” (The Last Question)? Thank you for indulging me. Now, let’s focus on some more relevant questions.
One, is the Ibuka programme a silent admission that the Growth and Enterprise Market Segment (GEMs) was a pre-mature project? Since 2013, only six firms have listed as GEMs. But here’s the problem; only one is truly profitable, two are more-or-less zombies, all except one rarely trade and one is effectively de-listed.
Needless to say, this market is practically dead. The big question is: if the pre-listing programme is part of the “let’s-get-SMEs-listing-agenda”, will it also involve redeeming GEMs image? Will it involve redesigning the screening process to let in quality as opposed to quantity? How about prioritising liquidity?
Two, are the recurring trading outages a reflection of an inherent system failure? Last 10 months, the market has experienced three system failures – this year’s January and April adding onto last year’s October failure. Is the ATS (automated trading system) second rate? Is the technology inherently unreliable or is there something deeper going on?
Reliability is fundamental to the Nairobi Securities Exchange (NSEs) value proposition for the market. If the market is not guaranteed about system uptime, then how do we expect investors to “discover opportunity”?
An immediate lasting corrective action is paramount if we are to secure a profitable future to our beloved exchange.
Three, is it time we talk marriage for the East African exchanges? This nationalistic focus on country exchanges is not getting us anywhere or is it? A merger is a win-win situation. Rather one big player than several small actors fighting for a small pie.
Granted, a merger will not be an easy task (these decisions are highly political and it’s tough giving up independence).
Further, establishing connectivity between several bourses (Dar es Salaam Stock Exchange, Uganda Stock Exchange, Rwanda Stock Exchange and the NSE) and providing logistics for delivery and payments requires huge resources, which may be an uphill task. But that said, the aphorism; two/three/four are better than one, applies here. A cord of three strands is not easily broken.
Why should exchanges merge? Most international investors are shying away from the higher costs of doing business – read higher commissions, illiquidity and lack of breadth. A marriage could deliver economies of scale that could translate into more efficiency, deeper markets and lower costs.
The biggest cost in trading shares across borders comes in the form of transaction fees meant to settle trades after they have been traded. So, is it time we talk marriage? In closing, another question. Do Fx traders really need 400:1 leverage to make money? Asking for a friend.
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