The Uganda Securities Exchange (USE) launched its electronic trading platform on Monday, a development that has yielded shorter settlement times for investors and faster trading cycles for stockbrokers after years of waiting.
Following this development, noisy scenes witnessed among stockbrokers haggling over prices – a characteristic of the open outcry method have been replaced with quiet, seamless and quicker trading operations.
The electronic platform is backed by three data service operators in an arrangement that is expected to guarantee stable connectivity in the event of network failures.
A wireless digital network covering all stockbrokers will be rolled out in early August to enable traders access the trading floor at their office desks, the bourse’s management said.
Through installation of the automated trading system (ATS), turnaround times for settling trades done at the bourse have reduced from five days to three days, a notable shift in trading operations that promises increased efficiency and higher returns for aggressive investors that make frequent transactions, observers say.
Widespread entry of offshore portfolio investors in young, emerging markets has raised demand for highly sophisticated trading platforms that accommodate quick entry and exit transactions done across different markets.
The introduction of a real-time trading window that offers almost instant equity deals has created expectations of bigger trading volumes and turnover in coming months.
Offer and bid prices logged into the ATS platform by stockbrokers are tallied together and generate deals in cases where matching price quotes are detected, sources say.
In contrast, the open outcry system allowed stockbrokers to outbid each other in a space of 30 seconds, a rule that created some delays as various market participants sought to outdo themselves, with large transactions taking more than 15 minutes to conclude.
In its second day of operation, a transaction worth Ush4.058 billion ($1.2 million) was recorded on the Umeme Limited counter with stockbrokers concluding the deal in less than two minutes, sources claim.
“The offshore investors have shown strong interest in the ATS platform, with many of them already consulting their stockbrokers on how to utilise the system through virtual links. Within a month’s time, all stockbrokers will be in a position to access the platform in their offices. However, the negative impact of tight monetary actions is still being felt in the equities market,” said Paul Bwiso, USE’s chief executive officer.
A pre-close auction session intended to promote market-making activities has been incorporated under the new trading platform.
Through market-making actions reflected in formal bargaining discussions carried out after normal trading hours, stockbrokers are able to review benchmark prices for listed companies and bring them closer to prevailing market valuations, experts pointed out.
As a result, overall trading hours have been increased from two to three hours per day to accommodate this exercise.
“The ATS has taken off pleasantly and the stockbrokers are keen to explore its opportunities. System tests will be completed within a month’s time and all stockbrokers will be able to trade remotely at their office desks while an electronic price display screen will be installed at the Securities Exchange to serve the general public,” said Robert Baldwin, chief executive at Crested Stocks and Securities Limited.