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Central Bank, Capital Market Authority select software provider for securities settlement

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The country’s financial regulatory body, National Bank of Ethiopia (NBE), and the recently formed secondary market regulatory body, Ethiopian Capital Market Authority (ECMA), select a company that will provide Central Securities Depository (CSD) software.
It can be recalled that with the support of FSD Africa, NBE and Ministry of Finance had introduced a CSD system project to streamline the financial sector with modern and technology based system.

(Photo: Anteneh Aklilu)

Brook Taye, Director General of ECMA, stated that the two government bodies have now finalized terms to secure the CSD software.
“The contract has been awarded, which would allow us to transform all of the securities especially for the banks,” he said on Friday, March 24 at a roundtable event organized by Bloomberg and ECMA for Ethiopian financial firms.
“Some of you have thousands of shareholders and all those shareholders and certificates are on a paper format in order to change those into an electronic format and dematerialize them, we need to have a system and the government through NBE and the Capital Market Authority has finalized the procurement of CSD system, which would allow all of you to convert your shares into an electronic format,” the founding head of ECMA elaborated.
He added that the benefit of having all the shareholders in an electronic format, with a unique identification is vital to financial firms who have a share transaction, when there is a transfer or some sort of a sale of their securities. When that transpires, the companies will be able to monitor exactly where the transfer is happening in the ownership of a secured electronic format.
“So we are very much happy that this is finalized and we look forward to your companies also to jump on to this opportunity and to be the first one to completely transform your securities into an electronic format, which is dematerialize with a very efficient way of managing your shares,” Brook underlined.
Brook told Capital that the bidding and selection process which identified the appropriate partner company on the implementation of CSD system was accomplished mid this week and stated that the details will be disclosed soon.
However sources told Capital that the company selected on the bidding process to implement the system is not new to the Ethiopian financial industry scene as it is a dominant player in the sector globally.
CSD is crucial in the secondary market since the market is based on organized and technology based accurate information.
On the project description of CSD, the statement cited that it will ensure the safe custody of securities, ensure accurate record-keeping and reporting, reduce transaction costs, minimize risk, improve efficiency in the transfer of securities, facilitate the implementation of corporate actions, and improve the integrity of transactions.
The CSD will promote increased liquidity and turnover in securities markets, increase transparency, and enhance investor confidence. An efficient and effective capital market will attract diverse investors, including foreign investors, increasing the volume and diversity of trades in Ethiopia’s capital markets.
The CSD will support the development of a deeper and more sophisticated domestic capital market with new asset classes, a pipeline of bankable projects and issuers and improved investment opportunities.

Improved investment opportunities will lead to increased access to finance for the public and private sectors for infrastructure and other sector-specific priorities.
This Project will contribute to creating economic opportunities characterized by increased access to jobs, incomes and basic services, ultimately leading to a sustainable future for Ethiopia.
The system will allow NBE to utilize the CSD system for government securities, and the system also aligned for corporate debt securities, equities, and funds.
The proposed CSD system will increase the efficiency of securities settlement in Ethiopia, leading to enhanced safety, lower transaction costs, and financial sector stability.
At the roundtable that gathered financial sector leaders Bloomberg Country Manager East Africa, Stuart Wakeman, and team, explained that the services of the dominant and prominent financial and market information hub-company will provide the necessary support needed in the stock market.
At the event, experts from Bloomberg demonstrated a system and tools on the capital market operations with the required information and analysis provided by the firm’s platform.
Wakeman said that risk management in the capital markets is very important, “So it is important that you have the systems for market risk, collateral management, and value of risk numbers.”
“We are not going to attempt to sort of influence you to take our products. That is not why we are here. What we really want to do is stress how important some of these factors are,” he said.
In the financial industry, Bloomberg claims that it has about 45 percent market share in providing information, data and systems.
The Country Manager expressed that his company will connect Ethiopian brokers, banks and exchange actors with Ethiopian investment managers, insurance companies and beyond to be able to trade with its counterparts in other countries.
Sirak Solomon, Senior Legal Advisor at ECMA, who reminds that the capital market will be open for foreign actors, said that the roundtable is crucial for local players in the financial sector, “We are not trying to push Bloomberg or any other provider. It is crucial to be aware of the tools that competitors are using to be competitive with the banks and the capital market service providers coming into the market.”
Brook said that similar events will regularly continue with different potential local actors.
The securities market is expected to become operational in 2024 at least by launching the exchange on the fixed income side, according to Brook.
Currently the authority is developing directives that will breathe life to the securities market, and some of the draft directives have been tabled for consultation.
“The capital market service providers’ license directive is completed. So we look forward to the license which we think is very important for our domestic participants to be the first ones to be licensed,” Brook said, adding, “The sector is open for foreign participants as well but our major priority is to ensure that our domestic market makers are the ones that will be licensed.”

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