New software to link NSE with top African bourses

Securities trader Joram Ongura at Nairobi Securities Exchange on August 26, 2020. PHOTO | SALATON NJAU | NMG

By PATRICK ALUSHULA
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Summary

• Currently, one can trade across the border but the process is cumbersome since it involves appointing a broker in the other country and routing of orders must happen in that particular country.
• NSE chief executive Geoffrey Odundo said they hope to realise the project next year and stimulate cross-border trading of securities across the participating Exchanges.

Nairobi Securities Exchange (NSE) is moving closer to getting linked with six other top bourses in Africa with purchase of key software that will facilitate the linkage.

The African Exchanges Linkage Project (AELP), which is driving the agenda, mid-last month opened bid for an order routing platform that will be crucial for seamless cross-border trading.

“The selected IT firms that are invited to bid had earlier prequalified through a widely advertised request for expression of interest process which attracted applications from top firms across 18 countries,” said the African Securities Exchanges Association (Asea).

“The AELP link technology platform will channel client orders from a stockbroker on one participating Exchange to a stockbroker on another Exchange, where it will be executed.”

AELP is a joint initiative of Asea and the African Development Bank (AfDB).

Currently, one can trade across the border but the process is cumbersome since it involves appointing a broker in the other country and routing of orders must happen in that particular country.

Order routing is the process by which an order goes from the end-user to an exchange. The order may go directly to the exchange from the customer or go first to a broker who then routes it to the exchange.

The participating exchanges include NSE, Casablanca Stock Exchange, The Egyptian Exchange, Johannesburg Stock Exchange (JSE), The Nigerian Stock Exchange, the Stock Exchange of Mauritius and BRVM, which is a regional bourse for eight West African countries.

The seven stock exchanges have a market capitalisation of about Sh132.5 trillion ($1.21 trillion), which JSE being the largest.

AELP says it is keen on procuring an order-routing solution that is already working and then customise it for the participating exchanges and stockbrokers.

NSE chief executive Geoffrey Odundo said they hope to realise the project next year and stimulate cross-border trading of securities across the participating Exchanges.

“All the discussions around how the market players will connect is almost complete. The next step will be to connect the pilot Exchanges,” said Mr Odundo.

The development comes at a time Uganda, Rwanda and Tanzania have linked their Exchanges.