Technology is the driver of securities exchanges around the world – currently there are big battles for supremacy in a range of markets and disclosure and clearing and settlement after the trade are also coming to the fore. Africa should be no different.
The continent is peppered with small national stock exchanges with too little liquidity to attract significant large investors (domestic and foreign) or to be cost-effective as a way to raise finance. However, in most cases a country will not agree to close its stock exchange – sovereignty can trump the desire for effective and liquid markets. It can also be important that financial institutions and intermediaries should be regulated locally.
A central technology provider for Africa’s markets is MillenniumIT (www.millenniumIT.com), a Sri Lankan group that offers a wide range of stock exchange systems including trading, central depositories and order routers. Last year the company was acquired 100% by the London Stock Exchange Group (www.londonstockexchange.com) for $30 million which seemed to confirm that LSE regarded MillenniumIT as a world leader.
The LSE-owned Turquoise multilateral trading facility went live with Millennium Exchange trading system on 4 October 2010 and the main SETS book will go live from 1 November. The Linux-based systems are set to be much faster and cheaper. MillenniumIT says its system is scalable from 1,000 orders/second to 1,000,000 orders/second – some African exchanges have not seen this many orders in a decade.
According to a press release at the time of the LSE Group purchase: “MillenniumIT’s high-performance technology will provide the Group with a highly scalable and very low latency in-house developed trading system with multi-asset class functionality and quicker product speed to market. In addition, the transaction will give MillenniumIT the backing of the Group to enable it to develop further its global exchange technology business.
Big players switch
Africa’s biggest exchange, South Africa’s JSE Ltd (www.jse.co.za), has long used the LSE TradeElect trading system and the Namibian Stock Exchange (www.nsx.com.na) trades on a special board set up on the JSE’s trading system. According to a JSE presentation last June it plans to go live in April 2011 with Millennium Exchange, and discussions continue on this.
MillenniumIT has also supplied trading systems to the securities exchanges in Kenya, Mauritius, Tanzania and Zambia, and central depositories and settlement systems in Botswana, Ghana, Kenya, Tanzania, Uganda and Zambia, among others.
The dynamic Stock Exchange of Mauritius (www.stockexchangeofmauritius.com), among the continental leaders in IT, has long promoted MillenniumIT trading and central depository systems. In addition to powering its own markets, SEM has also advocated them on other projects in which it has been involved, such as a central African regional exchange (which did not end up using Millennium IT), also Nairobi, Dar es Salaam, Botswana, Lusaka and the Bank of Ghana CSD.
In particular, MillenniumIT’s Smart Order Router system could support the hub-and-spoke model that is adopted by the Committee of SADC Stock Exchanges. Preparations are done and this is ready to move fast once funding is approved. The model can allow exchanges to continue to regulate their brokers and other institutions, as orders can be routed through local broking houses.
MillenniumIT also won the project for linking the East African Securities Exchanges and helping solidify the East African common market for capital but this too is awaiting funding.
Jit Seneviratne, Head of Business Development, told AfricaCapitalMarketsNews: “MillenniumIT sees a major role for itself in integrating African capital markets and we will use our technology to facilitate this. It certainly helps that we are already powering several exchanges in Africa… We have already identified the manner in which the links can be done.
“The only challenge if at all, is not in the trading but the clearing and settlement of pan African securities, but we have a plan for this as well.”
African IT implementations
The Sri Lankans said they designed and implemented the DSE system in 3 months going live successfully in September 2006. In 2008, Millennium systems successfully handled East Africa’s biggest IPO, after 750,000 people applied for Safaricom shares. Nairobi brokers remain enthusiastic about the NSE system, successfully implemented on 11 September 2006 after a 5 month period to develop, test and implement this system. The company press release quotes Chris Mwebesa, then Chief Executive Officer of the NSE, saying : “In the first day alone the difference in moving from a manual system to an automated trading system has given us astounding results. On September 11 when the system went live we had 3,761 trades compared to 759 trades recorded on September 12 2005. This is a very encouraging start.”
The company’s trading system for Zambia’s Lusaka Stock Exchange went live successfully in November 2008. It has been providing Lusaka’s central depository since the exchange opened under International Finance Corporation technical assistance in 1994. Although trading at the Ghana Stock Exchange uses another system, Infotech, the central securities depository of the Bank of Ghana is also powered by Millennium since 2004, and there are talks of further mergers in West Africa. Before being terminated in August, the former Director General of the Nigerian bourse said it was time to upgrade their systems.
Millennium provided a central depository and settlement system for the Botswana Stock Exchange which went live in August 2008. At the time, Millennium announced that the BSE can handles equities found in domestic, foreign and venture boards, corporate and Government bonds and commercial paper. Kenya’s Central Depository and Settlement Corporation (www.cdsckenya.com – USE and DSE also have shareholding) has offered services to Zimbabwe and has won a tender to act as registrar for the initial public offer of brewer BRALIRWA on Rwanda’s over-the-counter market.
There have been decades of talking and no action about ways to pool liquidity and facilitate more market efficiency, while the securities markets have failed to play their full role in Africa’s development. Now it could be that a solution is already in place and at people’s fingertips and the JSE and the rest of Africa could suddenly also happen to be on the same technology page. The challenge is for the policy-makers and strategists of Africa’s markets to turn this into reality. The upcoming African Stock Exchanges Association annual meeting (10-12 November) could be a good start.
BACKGROUND: According to the company:
MillenniumIT was founded in 1996. It employs 500 people, in 3 divisions – Proprietary Software Products, Enterprise Services and Exchange Operations. Its corporate HQ and Software Development is located in Colombo, Sri Lanka.
MillenniumIT systems are used by ICAP, the London Metal Exchange, and a series of emerging market exchanges and depositories and have been previously deployed at the American Stock Exchange and the Boston Stock Exchange.
MillenniumIT’s suite of capital market products includes Millennium Exchange (multi-product trading platform), Millennium SOR (smart order router), Millennium Surveillance (market surveillance and regulatory compliance system) and Millennium CSD (integrated clearing, settlement and depository functions).
Millennium IT is a sponsor of the 2010 ASEA conference in Livingstone, Zambia. Tony Weerasinghe, CEO of Millennium IT and Director of Global Development, LSE, is on the ASEA conference agenda to speak on “Creating a pan-African hub, for seamless trading, clearing and settlement.”