Rwanda Stock Exchange (RSE) has announced that it has received approval from the Capital Market Authority (CMA) to introduce new listing rules for exchange traded funds (ETFs) and real estate investment trusts (REITs).
ETFs are investment funds that track an underlying index, commodity, or basket of assets. They trade on a stock exchange, much like individual stocks. This means that the value of an ETF moves in line with the value of its underlying assets.
REITs, on the other hand, are companies that own and operate income-producing real estate properties. They are designed to offer investors an opportunity to invest in real estate without buying and managing physical properties.
The two are sophisticated financial instruments that are traded in countries with developed capital markets. They are commonly traded in markets such as the United States, Europe and Asia.
In Africa, the ETF and REIT markets are relatively new, but they have been gaining traction.
South Africa has a well-established ETF market with a wide range of ETFs tracking various indices and asset classes, Nigeria has listed several ETFs, including equity ETFs and fixed income ETFs, and the Egyptian Exchange (EGX) has introduced ETFs to provide investors with more diversified investment options.
The Nairobi Securities Exchange (NSE) in Kenya has seen increasing interest in ETFs, with several new products being launched. The NewGold ETF, for instance, allows investors access and trade gold bullions without having to carry physical bars of the precious metal.
These instruments generally offer investors a diversified way to invest in various asset classes, such as stocks, bonds, and real estate. This could attract more investors to the Rwandan market and increase liquidity.
"These developments mark a significant milestone in enhancing the robustness and transparency of the Rwandan capital market,” RSE said in a statement.
RSE executives believe the new rules will facilitate the listing and trading of ETFs and REITs on the RSE, providing investors with more diverse investment options and opportunities.
New ESG rules
RSE said it also received approval to introduce environmental, social and governance (ESG) reporting guidelines. These guidelines outline the standards for companies to report on their environmental, social, and governance practices.
"The introduction of ESG Reporting Guidelines underscores RSE's commitment to promoting sustainable and responsible investing practices within the market,” it said.
CMA has also approved an amendment to the secondary market transaction fees for fixed income securities by reducing the investor compensation fund fee applicable to the trading of debt securities.
This means that investors buying and selling debt securities on RSE will now pay a slightly lower transaction fee than it used to be.
Effective September 1st, 2024, the compensation fund fee will be reduced from 0.02 per cent to 0.005 per cent thus bringing the total transaction levy on secondary market trading for debt securities to 0.034 per cent from 0.049 per cent of the total consideration per trade.
Investor compensation fund fee goes towards a fund that protects investors in case of market failures or fraud. Total transaction levy is the overall fee for trading debt securities on the bourse.
According to RSE, this adjustment aims to reduce transaction costs for investors and further encourage participation on the fixed-income market.