Interview with Uganda Securities Exchange CEO, Paul Bwiso
On 1st September, 2015, the Uganda Securities Exchange (USE) officially launched the Automated Trading System that had been in place since July 22nd 2015, putting an end to the old-fashioned open cry system. PC Tech Magazine’s Joshua Twinamasiko and Emmanuel Onyango caught up with Paul Bwiso, the CEO of USE to share his plans for the bourse.
Below are the excerpts;
What was the motivation behind the introduction of e-trading in the Ugandan market?
For starters, the previous system was very inefficient and slow. The electronic system is a lot faster and with it, we can carry out an Initial Public Offer (IPO) within a very short time unlike in the past.
Basically, e-Trading brings in more trading and efficiency. Automation also helps increase liquidity in the market. It also shortens the settlement period from five working days to T + 3, which is more in line with international standards.
How prepared is the Ugandan market for e-trading?
The market is not really prepared for this kind of trading. This is a new system and a lot of sensitization is needed before people can really understand it. Global markets are all going electronic and if we are also to attract more investors, we need to toe the same line.
Is there a relationship between going electronic and offshore investor confidence?
The number of those coming on board since we went electronic is phenomenal. There of course those who are skeptical about the settlement time and also the big change within a short period. What we are telling them is that the process is electronic. Every week, we have three or four investment funds making inquiries. We have had JP Morgan, Citi Bank, Investec among others.
The only drawback currently is the depreciation of the Ugandan shilling because it brings in a lot of risk. We would have seen a lot more activity if our macroeconomic conditions were a lot more favorable.
Was the Automated Trading System sourced locally or imported?
We procured this system from a South African firm, Securities Trading and Technology (STT). It is the same system that is being used in Tanzania, it is the one being used in the Nairobi derivatives market and in other markets. It is tried and tested and the beauty about it is that it has now been customized to our market.
Did you consider local developers before opting for importing it?
No we did not look at the local market initially. A number of issues were taken into consideration like how long it would take us to develop the system. What we benchmarked with were the international markets. The depository was already electronic with MIT as the suppliers. We could have gone to them but we were looking at the future.
The world today is web based meaning we had to identify a supplier who would move us into that direction. STT offered us the latest technology with the latest security features. [related-posts]
Is there room for local developers to plug in the missing links like mobile money possibilities?
The way mobile telecom companies operate here is that they work with payment aggregators, so you do not connect to the network directly. So we have been speaking to the payment aggregators and a vendor has already offered us a platform for the USSD feature. The only thing we need to do is link the two.
The system we have currently covers so much that we do not need to develop new features in the near future. Also, the contract we have with them is that if we need any enhancements, they will provide.
That said, we aren’t locked into a long term contract and if the solution can be provided locally faster, we go with it.
How do you view mobile money as an avenue to push stock trading?
We currently have just under 27,000 accounts in the market. We are pushing for the mobile access to help increase those numbers. But then we have to also answer some fundamental questions like; can it be easy for me to sell my shares and get my money on my phone because my phone is my identity? Also can I get the right information?
Easy access to the markets through a mobile app and access to funds through finmobile money might drive traffic.
We have been talking to markets that are planning to head into that direction so as to get an idea of how we can implement ours.
Are there opportunities for locals developers to popularize stock trading?
The opportunities are there. We are not even blocking the local vendors. STT has been making the system for the international market and we are now customizing it to the Ugandan market.
If you come up with a solution; an educative product, that can help us reach out to many people, we welcome that. The security of the system we have is robust.
We even want to go into the commodities market because agriculture is the backbone of this economy. Equities are going to take us some time. They are not yet part of us; people think property, real estate. We need a lot of sensitization to enable people understand equities. We might have the gadgets and not have any investors.
You launched the ATS in under 6 months of being CEO. How have you managed to pull this off within a short period in office?
It was not I, but the team and the board. The board has been very supportive. The plan was already there, all it needed was execution. This was a shared initiative. We came in with the goal to achieve that within the first six months and that is what we delivered.
What other plans do you have for the USE? What should we look out for?
We are looking to introduce Direct Market Access. In this, people should be able to trade from the comfort of their homes. The service is ready but we need to link it to the banks to ensure that people can pick their money from their accounts or brokers and it is reflected in the system. This might take us a little longer than we had earlier on anticipated.
We have also reduced the settlement time and the international market is happy with the flexibility offered. We also plan to introduce Central Bank settlement and we are in talks with Bank of Uganda. It is a lot more efficient and faster and we don’t have to work with guarantee funds because the broker and the Central Bank are in contact. It is like Real Time Gross Settlement (RTGS) and is effective with government bonds as well.
We also want to move away fully from paper certificates. Our tentative deadline is end of first quarter of 2016.
We also plan to bring in Real Estate investment trust, the law is being worked on, and the system can also handle a property money market. This is under commercial banks at the moment.
We will also plan to offer derivatives. But we are wondering whether there will be a market for it. If people do not understand bonds and equities, can they now figure this out? As a market we shall provide the derivatives. We think it will be a little difficult for the market to embrace them unless we are doing this for the foreign market. We shall do some stakeholder mapping and find out if the foreign funds will be interested in our market derivatives because they are the majority trading in our market.