Share Trades Done on White Boards to End as Uganda Automates

The Uganda Securities Exchange is ending open-outcry trading, where offers are written on a board on the bourse’s floor, and moving to a system of electronic equity buying and selling.

The Kampala-based market expects to start electronic trading in July, Chief Executive Officer Paul Bwiso said in an e-mailed response to questions on April 14. The switch will help increase trading volumes, boost foreign participation, open the way for secondary trading of fixed-income securities and move equities dealing to three-day settlement from five, he said.

“Automation will enhance growth by increasing liquidity,” Bwiso said. It will also attract more initial public offerings and give the exchange the option of introducing new trading products, he said.

The bourse in Africa’s biggest coffee exporter is ending a system already scrapped by other exchanges on the continent, including Ghana and Kenya. Uganda is looking to attract investors into an economy where growth is set to outpace the sub-Saharan African average this year, according to the International Monetary Fund. The USE’s all-share index of 16 stocks rose 7 percent in 2015 through Wednesday, compared with a 5.3 percent gain in the gauge of the most-liquid stocks in neighboring Kenya, which automated trading nine years ago.

‘Easy Access’

The bourse, which started operating in 1998, also trades government debt securities and bonds issued by companies including Kakira Sugar Ltd. and Standard Chartered Plc’s local unit. Last week at the bourse, traders said they were doing trials on the automated system at newly installed computers.

“We see the market growing because of the opening up to global markets,” said Joram Ongura, a broker at Standard Bank Group Ltd.’s SBG Securities, who was at the exchange on April 10. Traders struggle to catch the attention of the person who writes offers on a board in the open-outcry system, and automation will give them “easy access to market data,” he said.

Trading by hand limited the stock exchange’s liquidity, number of listings and investor base, the bourse’s Bwiso said. With automation, he anticipates new stocks will start trading because of improved processes for IPOs and more interest from retail traders with Internet-based software. Secondary trading of fixed income will also give investors another product to buy and sell, he said.

‘Potential Returns’

Uganda’s exchange may not see an immediate jump in new listings and trading. In the 12 months after the Nairobi Securities Exchange automated, two stocks were listed, compared with four in the prior period, according to data compiled by Bloomberg. After the initial lull, another 11 companies started trading their securities.

Ghana, which started electronic in March 2009, didn’t get its first listing after ending white-board trading until 15 months after the system was scrapped. Uganda is outperforming Ghana’s Composite Index in 2015, which is down 1.3 percent. The Ugandan shilling gained 0.2 percent to 3,000 per dollar as of 5:56 p.m. in Kampala.

Development Finance Co., a Kampala-based provider of mortgages and other financial services, rallied 41 percent over the past 12 months, while British American Tobacco Plc’s Uganda unit climbed 31 percent. Umeme Ltd., the power distributor owned by Investec Asset Management Ltd. and Actis LLP, gained 33 percent.

“Investors anticipated that listed companies would perform well considering the economic environment,” Bwiso said. “Foreign investors are interested in the market due to the potential returns.”

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