Wear the right fit, Tsheole urges African exchanges

Mbongeni Mguni | Friday November 29, 2019 17:34

Speaking at this week’s African Securities Exchanges Association annual conference held here between Sunday and Tuesday, Tsheole said trading systems and other infrastructure associated with stock exchanges were too expensive to procure and maintain for African bourses to get wrong.

He was contributing to a panel discussion on the impact of infrastructure on growing Africa’s capital markets.

“To be very honest, most of the stock exchanges in Africa don’t need to have their own trading systems,” Tsheole said.

“When you look at the cost of getting these systems such as the Automated Trading System and the Central Securities Depository, these are very expensive, while ongoing maintenance is also very pricey.

“Most of them are not tailor-made for our markets and are very advanced or far ahead of the stage of development of our markets.

“You may be paying for a system that’s higher than the level of development you are on.”

Only a handful of companies provide globally recognised stock market trading infrastructure and investors are generally unwilling to participate in platforms run by unrecognised systems.

Tsheole revealed that the BSE’s trading system was the same as that used on the JSE and Nairobi Securities Exchange even though the local bourse had only 100,000 investors compared to the far greater numbers on the other two exchanges.

“The biggest problem is not the sellers of the systems, but the African markets,” he said.

“We are not able to share infrastructure although there’s some progress being made.

“We tried interconnectivity previously in SADC but we were not sure whether South Africa wanted to interconnect or swallow us.

“We can interconnect, but what is the best way.”

Collen Tapfumaneyi the founder and CEO of Escow Group, a Nairobi-based fintech group, told the conference that infrastructure is the engine that drives markets and it must address not just speed, but efficiencies, security and costs.

“The infrastructure must address convenience because it exists to serve investors and clients,” he said.

“It is on convenience that we should look at options around homegrown solutions.

“The infrastructure must be fit for purpose and address the diversity of the market we are catering for.”

He noted that in areas like Kenya, the exchange there was leveraging on high mobile connectivity to introduce trading platforms for retail investors, which was an example of responding to local requirements.