OPEN AND COMPETITIVE MARKETS have created new opportunities for market participants for trading between different markets, thereby increasing liquidity and contributing to optimal use of existing network capacities. In many regions mainly the East Africa, this has resulted in severe congestion between different markets since existing network capacities are insufficient to satisfy the entire demand from the market. Experience has also shown that many countries are too small to allow for sufficient competition to develop. However, such problems may be overcome by merging markets into a single regional market. Scope is thereby reduced for companies to gain market power and the market can support a larger number of players. This is being demonstrated by the successful establishment of the East African Capital Market Infrastructure (CMI) to link the four markets across within the region come the second part of this year 2021. Trading at the Rwanda Stock Exchange (RSE) is expected to become fully automated as today only the Central Depository System (CSD) is operational where owners of shares and bonds have their accounts already automated and it takes two working days for one’s shares to be transferred to his or her names in an electronic format unlike before where it used to take up to three months to transfer stock ownership due to a tedious manual process. This automation will not only make Rwanda stock exchange more efficient but also better in terms of attracting new investors to the market, regional integration further helps to optimize operation of the overall system by removing boundary issues and allowing optimization of integrated production, market operations and trading. Over time, focus has therefore shifted towards the integration of neighboring markets or, eventually, the creation of regional markets. This trend has been observed in Europe, the U.S. and other regions world-wide. East African Capital market experts are helping stakeholders to understand the different concepts and assess the resulting opportunities, risks and requirements in the new environment of linking the markets using Technology as an enabler. Development towards regional markets varies both in the degree of integration and the concepts or instruments being used like cross listing of companies across the region. Moreover, it is necessary to consider different market models and legal and regulatory issues as well as organizational, technical and procedural aspects. Successful regional integration therefore requires a wide range of conceptual analysis and activities such as choice of integration models in technology like the one being used the East African markets of linking all the Automatic Trading Systems (ATS) and the Central Securities Depositories (CSD in the EAC region. The overall objective is to allow a seamless movement of securities and payments between the different EAC Capital Markets compatible at the regional level. This project is fully backed by a whole set of regional capital market directives that have been created by the EAC partner states to allow smooth flow of investments into the region through the various stock exchanges. The author is the Head of Operations and Technology at Rwanda Stock Exchange with more than 10 years of experience in investment, Capital Markets and Technology. The views expressed in this article are of the author.
