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Page 71 South Africa
domestic survey
African markets
take steps to
build stock
exchange
linkages
AFRICA’S STOCK MARKETS
ARE INVESTING A LOT OF TIME
AND EFFORT INTO STRENGTH-
ENING AND FORMALISING
CROSS-BORDER LINKAGES
AND RELATIONSHIPS.
A
dvocates of cross-border harmonisation
and cooperation typically take inspi-
ration from the EU, but they should start
looking at Africa as well, where there are
a number of initiatives in play to facilitate
better connectivity and linkages across
national stock exchanges.
Admittedly, there is no pan-African CSDR
(Central Securities Depository Regulation),
EMIR (European Market Infrastructure Reg-
ulation) or Target2Securities (T2S) equiva-
lent, but its stock exchanges are highly inte-
grated, and a lot of time and effort is being
invested into strengthening and formalising
these relationships.
“The creation of stock exchange linkages
across various multiple markets brings a
number of advantages. The first is that it is
a useful tool towards stimulating regional
trade and international investment, some-
thing which will bring liquidity into these
capital markets. Simultaneously, a regional
exchange covering several markets is also
more cost-effective than setting up infra-
structure in each country,” explained Chris
van Staden, regional head for securities
services for Africa and the Middle East at
Standard Chartered.
Francophone markets already have two
regional stock exchanges. The Bourse
Regionale des Valeurs Mobilieres (BRVM) in
the Ivory Coast serves Benin, Burkina Faso,
Guinea Bissau, Mali, Niger, Senegal and
Togo, in addition to its home market. The
Bourse Regionale des Valeurs Mobilieres
d’Afrique Centrale (BVMAC) in Gabon looks
after the Central African Republic, Chad,
Congo and Equatorial Guinea.
Similar projects are ongoing across the
EAC with Kenya, Uganda, Tanzania and
Rwanda all participating, while the West
African Capital Markets Integration Project
(WACMI) successfully harmonised the rules
for securities issuances in its regional sphere
of influence.
Meanwhile, the Africa Exchanges Linkage
Project (AELP) – an initiative spearheaded
jointly by the Africa Development Bank
(ADB) and Africa Securities Exchanges
Association (ASEA) - is trying to connect the
exchanges of South Africa, Kenya, Nigeria,
Ivory Coast, Mauritius and Morocco.
Cross-border stock exchange links do,
however, face practical hurdles as a conse-
quence of regulatory arbitrages; differences
in governance standards, investor-types and
products, heterogeneous IT infrastructure
across local financial institutions, and of
course politics. Nonetheless, backers of the
AELP say progress – albeit incrementally – is
being made, and many are keen to draw on
the experiences of other countries which
have undertaken similar exercises in market
infrastructure connectivity.
Framers of schemes like AELP could look
to learn from China through its Shanghai/
Shenzhen – Hong Kong Stock Connect,
about how to effectively implement
exchange linkages, for example. “Having
played a key role in the Hong Kong-Shang-
hai/Shenzhen Stock Connect process, we
are well placed to leverage those experienc-
es to assist the AELP working groups when
they are established” said van Staden.
Stock exchange linkages will not emerge
overnight in Africa, but the continent is
making all the right steps towards attract-
ing more international investment and
generating deeper liquidity pools.
Spring 2018
globalcustodian.com
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