[2007-11-23]  IMF Warns On Manual Stock Trading
A study by the International Monetary Fund reveals that the use of manual system of conducting trading in most African stock exchanges is one of the major bottlenecks to the growth of the stock market on the continent.

For African stock markets to grow and perform like other stock markets in developed countries, the study says automated trading system should be introduced.


The bottlenecks related with the use of manual system to conduct trading include the fact that it encourages inefficiencies, slows down trading activities and affects liquidity levels in the market.

"Promoting stock market development in Africa would require policies to address institutional and infrastructural bottlenecks and to improve liquidity. The main infrastructural bottleneck is the use of slow manual systems," the report reads in part.

Uganda is one of the African countries that still use manual system to conduct trading. Uganda Securities Exchange (USE) has often said the absence of electronic system trading is due to lack of an information and communication technology laws that would facilitate the use of the electronic trading system otherwise the USE has already installed the equipment.

It blames Parliament for delaying to pass the Central Depository Bill.

The IMF says the policy question is how to promote the development of African stock markets.

It states that even though markets are gradually adopting electronic systems, there are still substantial African stock markets that trade manually and use manual clearing and settlement.

"Similarly, most markets do not have central depository systems, while some markets still have restricted foreign participation. Such bottlenecks slow trading and induce inactivity," the study adds.

The IMF study also suggests that regional integration of stock markets would increase the market size of African stock exchanges because the number of national exchanges would decline.

The IMF says that the development of stock markets in Africa is expected to boost domestic savings and increase the quantity and quality of investment.

Today, 16 African countries, including have stock markets with a capitalisation of $245 billion.



Source: Copyright © 2007 The Monitor.