The AELP is a flagship project of the African Securities Exchanges Association (ASEA) and the African Development Bank (AfDB) to facilitate cross-border trading of securities in Africa. AELP will improve the depth and liquidity of Africa’s capital markets and foster investment flows among the participating Exchanges by enabling:
- Cross-border securities trading using an order-routing system (AELP Link technology platform) to channel orders between Stockbrokers on participating Exchanges
- A Stockbroker sponsors the trade on the host Exchange
- Custody and settlement will be on the host Exchange according to its market rules and practice. Sponsoring broker and local custodian will be involved.
In its initial phase, the Project aims to create linkages between seven African capital markets that represent more than 90% of Africa’s market capitalization.
The AELP is funded through a grant of $980,000 from the Korean-African Economic Cooperation trust fund (KOAFEC) administered by AfDB. The participating Exchanges are contributing to the running costs of the Project Management Office(PMO) and the Nairobi Securities Exchange is hosting the PMO.
Information is available at the AELP website
Currently we are in Phase 1 of the AELP in which we are working with seven Exchanges:
|1||Bourse Régionale des Valeurs Mobilières (http://www.brvm.org/)||Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo (WAEMU Region)|
|2||Casablanca Stock Exchange (http://www.casablanca-bourse.com/bourseWeb/en/index.aspx)||Morocco|
|3||The Egyptian Exchange (https://www.egx.com.eg/en/homepage.aspx)||Egypt|
|4||Johannesburg Stock Exchange (https://www.jse.co.za/)||South Africa|
|5||Nairobi Securities Exchange (https://www.nse.co.ke/)||Kenya|
|6||Nigerian Exchange (https://ngxgroup.com)||Nigeria|
|7||Stock Exchange of Mauritius (https://www.stockexchangeofmauritius.com/)||Mauritius|
Phase 1 is the pilot phase during which the system is developed and implemented, including user acceptance testing and testing in action. No more Exchanges are expected to join during Phase 1.
Once ASEA has evaluated the pilot phase, they will be able to determine the requirements for Exchanges to join Phase 2 or future phases.
The timetable for the implementation of the AELP will be agreed during the Bidding and will be finalized as part of the contract with the chosen Supplier for providing the AELP Link platform.
All instruments and securities which are listed on the participating Exchange and which are accessible to foreign investors via a local sponsoring broker will be eligible for trading through the AELP Link.
Your Broker and the Sponsoring Broker may have published research about the investment opportunities. However, often the best place to look is at the website of the Host Exchange and also to look at the Investor Relations section of the website of the company or issuer you are hoping whose security you are hoping to trade in.
You will work through your preferred Broker in your home market. Your Broker will need to have a relationship in place with a Broker who is a member in good standing of the Exchange where there trade will be executed. Once you ask your Broker to submit your order, your Broker will become the Sponsored Broker and the Broker on the Exchange where the trade will be executed with by the Sponsoring Broker. You should continue to deal with your Broker in all matters.
Once your Broker has an arrangement with the Sponsoring Broker on the Exchange (“Host Exchange”) where you wish to buy or sell your security, the actual trade execution will follow the market practice of that Exchange. Settlement will also be according to the timing and practice of that Exchange. However, depending on your situation and the relationship between the broking firms as well as market practice, in the case of a buy order you may need to transfer funds in advance (prefund) or to otherwise satisfy the parties that funds are available. If you are selling it may take normal international transfer times from that market to transfer the funds to your account from the settlement system of the Host Exchange. If you normally work with a Custodian, you should set up arrangements in the market where you wish to trade before you trade there.
Settlement of the trade will be using the clearing and settlement system of the Host Exchange. The shares will be held in the central securities depository or other share registration and holding system of the host market, where the trade was executed. If the investor usually works with a custodian, the usual arrangements will apply including custody or sub-custody.
Trades will be in the currency of the Host Exchange and will need to be settled in that currency too. If you are buying, you may need to transfer funds in advance, usually through normal banking channels. If you are selling you will need to make arrangements to transfer your funds back to your account and again you are likely to use banks. The FX (foreign exchange) rates will be according to the rates on offer or for negotiation at the relevant banks.
The AELP does not prescribe fees to the Brokers, since this is a commercial arrangement with their clients and according to practice on the participating Exchanges. However, the AELP Steering Committee has recommended to Brokers that the total cost of the transaction should not be more than if the investor went directly to the Sponsoring Broker. That means the Brokers should aim to share one set up broker commission and this should be divided between the Sponsoring Broker and the Sponsored Broker (originating broker) as per their agreement. Other fees and expenses will relate to transferring funds and other activities.
The Executive Committee of ASEA is the key governing body for ASEA and thus for the AELP. However, each cross-border trade will be regulated by the Host Regulator, that is the Regulator of the Exchange where the trade is executed.
Disputes will be regulated by the regulatory authority (including where the Exchange is a self-regulated entity and/or the capital market regulator) of the market where there trade was executed (“Host Exchange”). Where there is a cross-border dispute between Brokers, that will be governed by the agreement that is in place between the two brokerage firms.
For Asset Managers and Brokers
A broking firm must be a member firm in good standing of one of the participating Exchanges. They will apply to their own Exchange in order to be allowed to connect to the AELP order-routing platform. The participating Exchange can provide other information and guidance
It is up to each Broker to find a suitable foreign Broker to work with and to build a good working relationship, including putting relevant agreements in place. The two brokerage firms will need to get to know and trust each other, including screening checks. The AELP Legal Committee has prepared a guideline agreement between the Brokers but this is only a guide. Each Broker should make their own agreement and a copy should be sent and approved by the ASEA Secretariat before the link between the Brokers can go live.
The AELP is complementary to existing methods of trading across Africa and the project aims to support increased flow of orders, information and investment across all channels. The advantage of the AELP is that it is a collaboration platform driven by the Exchanges themselves and seeks to drive harmonization and best practice in cross-border trading and market regulation.
If the branch of the stockbroker is a member of the Exchange where the Broker’s client wishes to trade, then the Broker can use that branch as Sponsoring Broker on that Exchange.
Each Exchange will operate according to its normal trading hours and days and within its time zone. The final arrangements are still to be negotiated with the Supplier for the AELP Link order-routing platform. However, it is likely that orders will be able to be queued if they are submitted while another market is closed and similarly with other messaging such as trade confirmations.