Uganda moves towards immobilization

The Uganda Securities Exchange ( is aiming for a 28 June deadline to finish immobilizing the shares listed for trading, according to a statement issued by the bourse and reported in local media. Companies whose shares are being moved into electronic form include Bank of Baroda, East African Breweries, Equity Bank, Jubilee Holdings, Kenya Airways, National Insurance Corporation and British American Tobacco, reports East African Business Week (
Investors have been gradually moving from holding paper certificates as proof of owning shares in a company to keeping them through electronic records at the Securities Central Depository (see the USE website ). Once a share is held on an electronic register, shareholders cannot use their old share certificates.
The aim is to support automated trading on the USE, which could start as soon as next January. The paper quotes a market analyst as saying: “Liquidity once again will be the issue but this is not likely to impact the market performance in the long run.” However the paper says that the immobilization, which started on 29 April with the immobilization of Stanbic shares, has led to lower trading volumes on the exchange.
The paper quotes the Manager of the Securities Central Depository, Joel Lutamaguzi, as being happy with progress: “The ultimatums have worked. I am thrilled with the response from the public and if we can get this through this process then we will be getting closer to automated trading.”
Investors are opening accounts with the Securities Central Depository Agents (SCDAs), who are mostly broker/dealers and include all the brokerage firms licensed by the Capital Markets Authority and commercial banks.
The Nairobi Stock Exchange ( also uses automated trading and a securities depository. Nairobi also reportedly saw lower trade volumes during immobilisation.
The USE has been trading since 2000, and its first listed company was Uganda Clays.
The New Vision newspaper interviews Harriet Kiwanuka, the USE’s research and market development manager. It quotes her as saying: “Immobilisation means shares are pooled into the system and for anybody to trade, you need to get your certificate to the SCDA who will deliver it to the USE for depositing to certify trade. Once a counter is immobilised, you cannot use a paper certificate to trade on the floor. Everything has to be entered into the system for trade to occur.
“We cannot run a parallel system of trading electronically held securities parallel to paper securities because of the risks, and reconciliation challenges involved.
“We are only trading electrically deposited securities. Anybody holding Stanbic, New Vision, DFCU, Uganda Clays and Kenya Commercial Bank certificates has to go to SCDA because these counters have been immobilised.”
She says that there has been a lot of education, but many people will only immobilize their share certificates when they decide to sell and, although there is demand, prices are lower and many sellers are not keen. However, response on immobilization has been satisfactory and she says 300 million shares have been immobilized in 1,400 new accounts. The response is across the board, with account openings by the locals, institutions and foreigners which means education efforts are paying off.
The Nairobi Stock Exchange has already immobilized shares, and faced a similar task of convincing shareholders to act, until the listing of Safaricom. Immobilization and electronic trading are part of moves towards an integrated East African securities market.


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