The Ethiopian Capital Market Authority (ECMA) announced the issuance of a groundbreaking directive that will enable the licensing of the first securities exchange in Ethiopia. This milestone marks a significant step towards establishing a structured and regulated capital market in the country.

Directive Overview

The ECMA, an autonomous regulatory authority established under Proclamation No. 1248/2021, has been empowered to issue directives in accordance with Article 108 of the proclamation. In line with this mandate, the authority has prepared and registered the “Directive on Licensing, Operation, and Supervision of Securities Exchanges, Derivatives Exchanges, and the Over-The-Counter Market No. 1009/2024.” This comprehensive directive, registered by the Ministry of Justice of the Federal Democratic Republic of Ethiopia, takes effect starting July 16, 2024.

Key Provisions

The directive sets forth the necessary documentation, terms, and requirements for obtaining a license to operate securities exchanges and over-the-counter markets. It outlines a robust supervisory framework for exchanges, requiring internal regulations approved by the authority, and specifies reporting obligations to ensure transparency and compliance. Key standards governing the process are also detailed in the directive.

Impact on the Ethiopian Market

For the first time in Ethiopia, this directive facilitates the licensing of securities and over-the-counter markets, enabling both government and private companies to utilize the market for selling shares and bonds. This creates a conducive environment for raising capital and undertaking significant projects. The directive establishes a transparent and controlled trading system for licensed service providers to buy and sell securities, enhancing market efficiency and investor confidence.

Consolidation of Securities Trading

This directive consolidates the previously fragmented securities trading in Ethiopia into a single, licensed, and regulated market. By doing so, it enhances the sector’s contribution to stakeholders and the national economy. The streamlined framework is expected to attract more investments and facilitate economic growth.

Pathway for the Ethiopian Securities Exchange S.C.

The directive also paves the way for the Ethiopian Securities Exchange S.C. to commence operations by granting it an exchange license. This marks a historic development in the Ethiopian financial sector, setting the stage for the establishment of a formal securities exchange that will play a pivotal role in the country’s economic development.

The issuance of this directive is a monumental step in the evolution of Ethiopia’s financial markets. The ECMA’s efforts are geared towards fostering a vibrant, transparent, and regulated capital market that supports economic growth and development. Stay tuned for more updates on the progress of Ethiopia’s capital market and the launch of the Ethiopian Securities Exchange S.C.