The Dar es Salaam Stock Exchange (DSE) has deployed a wide area network (WAN) that allows brokers to trade from their offices instead of going physically to the trading floor.
The local area network (LAN) currently in use replaced the open outcry system that had been in place since the establishment of the market. The upgraded system now puts Tanzania’s bourse at par with the Nairobi Securities Exchange.
The Uganda Securities Exchange (USE) and Rwanda Stock Exchange (RSE) are the only two bourses in the East African region that are still using the open outcry system.
“This will give access to more players and services can now be accessed easily and widely across the country. The new system will increase the level of efficiency and provide wider access to investors in the stock market,” said Moremi Marwa, chief executive officer of the DSE.
Mr Marwa said cutting the settlement cycle would grow the daily number of transactions in the market and help investors to reinvest faster and manage their capital more efficiently.
“These changes aim at making the market more efficient, liquid and less risky,” said Mr Marwa.
Brokers said being connected to the wide area network had made it convenient for trading.
“It is for equities and bonds, and it will lead to the extension of trading hours beyond normal times, although this will come later. We will now be able to capture trades that come later on in the day just before the market closes,” said Joseph Uiso, research, operations and trading manager at Tanzania Securities Ltd.
The Dar bourse also announced that it had cut the settlement and payment cycle to four days on equities (T+3) from six (T+5) and two trading days on bonds (T+1) from four (T+3). This is also expected to lead to increased volumes and turnover at the bourse, which has this year seen a sharp increase in foreign investor participation.
Foreign investor participation at the Dar es Salaam bourse had jumped to 47 per cent as at the end of the third week of June compared with just 14 per cent over the first six months of last year.
Total turnover at the bourse through to June 21 this year, had more than doubled to Tsh41.8 billion ($26.1 million) from Tsh18.6 billion ($11.8 million) over the same time period last year.
“We are now trading from our offices, where there is more flexibility and freedom. There is also confidentiality, as we had seven brokers on one trading floor. Hopefully there will also be more volumes,” said Lauren Malauri, chief executive of Orbit Securities.
NSE replaced its open outcry system with an automated system in 2006 and then implemented a wide area network in 2007, eradicating the need for brokers to send their dealers to the trading floor to conduct business it then uploaded all government bonds onto the automated trading system in 2009.
It is on a four day (T+3) settlement cycle for equities and bonds, although settlement for debt securities could be shorter. The USE is on a four day (T+3) cycle for the delivery of equities while corporate bonds are on a four day settlement cycle.
Rwanda’s bourse changed its settlement cycle to three days (T+2) for all securities traded from six days (T+5) for equities and four days (T+3) for bonds in August 2011.