Cross-border share trading shortened to four days

Saturday February 16 2013

By DAVID MUGWE Special Correspondent

The trading of shares cross-listed on the East African stock markets is expected to take four days, down from the current delay of up to two months, once the electronic settlement of transactions is implemented.

The East African Securities Exchange Association (Easea) has approved an inter-depository transfer system that will allow central depositories to electronically move cross-listed shares, starting next month.

In a press communiqué released on Tuesday after a meeting in Uganda, the association, which brings together the regions’ central depositories and security exchanges, said members had approved the new trading system.

Investors who want to trade cross-listed securities in another market will no longer have to convert the shares into paper form, transfer them physically to the other market, then convert them again into electronic form.

During a media briefing organised by the Capital Markets Authority (CMA) and the Association of Chartered Certified Accountants on Tuesday, Florence Kamau, the chief manager of operations at the Central Depository and Settlements Corporation (CDSC) Kenya, confirmed that central depositories will sign a memorandum of understanding on the process in the next two weeks.

“The mechanism will allow depositories to transfer securities without physical certificates... it should not take more than four days. The memorandum of understanding will spell out the responsibilities of each depository for purposes of risk management,” said Ms Kamau.

In the past, the lengthy process has hindered the trading of cross-listed shares in other markets other than where they are primarily listed.

In Kenya for instance, Ugandan electricity distributor Umeme’s shares have not traded at the NSE since their cross-listing on December 14 last year, but the counter has traded 43.28 million shares at the Uganda Securities Exchange (USE) in the same period.

Kenya Airways (KQ), Jubilee Holdings Limited (JHL), East African Breweries (EABL), KCB Group and Nation Media Group (NMG) are cross-listed at the Dar es Salaam Stock Exchange (DSE).