African capital markets are increasingly adopting disruption to make investing more transparent and accessible to a younger, tech-savvy generation, and see an increase in trading volumes.

Oscar Onyema was appointed the new CEO of the Nigerian Stock Exchange (NSE) in 2011, having previously been senior vice president of the American Stock Exchange. The exchange needed to change to increase transparency and make investing easier, and for this, Onyema turned to technology.
The NSE’s X-GEN trading platform was launched in 2013, offering better access to real-time data, thereby improving governance and transparency. Onyema described it as the fastest-trading platform in Africa.
Its impact was immediate. The average daily value of trade increased by around a third, to over $14 million in 2017. Other capital markets across the continent are following suit and adopting tech to make investing more transparent and accessible. The Nairobi Securities Exchange, for example, rolled out its Automated Trading System in 2014.
<blockquote>&#8220;Technology has enabled stock exchanges to enhance their surveillance capabilities contributing to transparency in the market,&#8221;</blockquote>
The Nairobi exchange followed this up with the launch of its own mobile app, which its head of brand and corporate affairs Waithera Mwai-Ireri says would “democratize” access to capital market-related information in Kenya. The app provides quick and easy information for potential investors and allows investments to be made in real-time.
Mwai-Ireri said the move was designed to make investing on capital markets accessible to a younger, tech-savvy generation.
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“The NSE app will enable investors to track market activity on a continuous basis enabling them to make real-time investment decisions. The app will spur interest in the capital market amongst the youth in the country, who make up over 75 percent of our total population,” she says.
The Nairobi exchange is a leader in Africa in terms of tech not only for its app, but its mobile-traded government M-Akiba bond. Mwai-Ireri said stock exchanges across the continent were seeing huge increases in trading volumes as a result of the use of technology.
“The use of technology has fast-tracked the development of Africa’s exchanges. Technology has enabled stock exchanges to enhance their surveillance capabilities contributing to transparency in the market,”
she says, adding she expected more exchanges across Africa to launch mobile-based applications in the coming years.
The younger, tech-savvy audience being targeted by exchanges such as those in Nigeria and Kenya may, however, have already found alternative ways of investing their money, away from traditional institutions such as exchanges and banks.
A platform tapping into a desire for alternative investments is South African company The Sun Exchange, which is also utilizing the increased uptake of cryptocurrencies. Using the platform, people use cryptocurrencies like bitcoin to buy solar panels, which The Sun Exchange then leases to businesses in Africa. Users earn income from these panels over a period of the next few years.
Founder and CEO Abraham Cambridge said improvements in efficient peer-to-peer payment systems and crowdsourcing has meant that entirely new investment models and platforms have become possible, solving problems that could previously not be solved. He said this trend will likely continue.
“Consumers are becoming increasingly skeptical of opaque and slow traditional banking. Modern day millennials will soon be the dominant investor group as they begin to inherit baby boomer wealth, and this group is used to instant gratification, transparency and a desire to change the way the world works,” Cambridge says.
“In addition, traditional financial institutions are becoming increasingly risk averse, which means that investments into startup businesses and innovative concepts, such as projects built around cryptocurrencies, find it extremely hard if not impossible to raise capital through these traditional means.”
He says the appeal of using cryptocurrencies for investments was that they are open and universal.
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“This means that previously unbanked customers, of which there are hundreds of millions across the African continent, can now engage financially with the rest of the world. In the case of The Sun Exchange, this means we can transact with the whole world using a single currency,” he says.
Smaller, micro-investments are also possible.
“As cryptocurrency can be broken down into over eight decimal places, nano-transactions at lightning speeds can now happen. This means that an investor can choose to place very small sums into projects and earn nano-payments out, with ultimate security and transparency,” says Cambridge.
It is this kind of flexibility and transparency major capital exchanges across Africa are trying to match with their own use of tech. Time will tell if this will work or if the opportunity has passed them by.
&#8211; By Tom Jackson

Tech scene in Cape Town, South Africa

Trading On Technology

It was a warm day in Sandton, Johannesburg. As we meet, Vital Sounouvou crouches, leaning heavily on his cane, as he greets us. It is a bad day for him, he is in pain. Pain has played a big part in his journey to entrepreneurship.
“When I was six years old, I had malaria and the doctors gave me an injection that cures it but it also attacked the bones and killed the nerves. I was almost paralyzed on my left leg and had to use a walking stick since then,” he says.
Treatment didn’t help. Life was never the same; his peers mocked him and his elders pitied him.
“I had to go to school with metals attached to my body. This had a positive side though because instead of playing outside I was forced to be indoors, read books and daydream. This had an impact on the man I have become.”
Time opened his eyes and he saw opportunities for entrepreneurship. He graduated from high school at 16. A year later, he opened his first business.
“I feel I was blessed to be born in Benin. Poor country? Yes, but it is the most stable in the region. All our neighbors were in war but not us. We are blessed by nature. Trade is part of our culture. There is a shop in front of many houses and most people from my city (Porto-Novo) become entrepreneurs of some sort,” says Sounouvou.
The 25-year-old says 85% of the youth in Benin are unemployed.
“When I started college, the first thing the professor told me was that I won’t find a job after completing my studies.”
The gloomy professor’s sobering words spurred him on. Sounouvou founded Exportunity, a site that promotes export opportunities for Africans by connecting producers with traders. It allows a farmer in Benin to sell his produce to a buyer everywhere from South Africa to the United States through a cell phone.
“There was a huge information gap between the offer, demand and the market. We wanted to promote products made locally. It was very hard to find producers but it was even harder to compete with international brands locally,” he says.
Sounouvou built a mobile application that works on all types of devices, including non-smartphones. Farmers are the target.
“Almost 70 percent of whatever crop is produced in Africa is wasted because the producers have no way to get the product to market. There are many problems ranging from the costs of locating a buyer, to dealing with middle men in cash, to suffering losses due to scams,” he says.
The computer science graduate was inspired by eBay.
“We are like eBay for wholesale. Imagine if Alibaba conducted a proper due diligence on every stakeholder before accepting them on the platform. People don’t just come on Exportunity and just register and start trading, they apply and we do due diligence before allowing them on. We had to adapt to the producer in Africa because some don’t use a lot of technology. We had to create Exportunity trader tablets for people without access to high technology so they can have access to international trade,” he says.
Buyers and sellers pay a membership fee to trade.
“People traditionally have to travel with large sums of money to trade but this site cancels the travelling costs and the risks associated with carrying large sums of money.”
Exportunity has externalized most of its management to Temple Corporate Services in Mauritius and has 17 permanent staff.
“In May 2014, global rice prices plunged to a historic $403.59/metric ton, the lowest since January 2008’s 393.48/metric ton. Jumping on an unprecedented opportunity, Exportunity-Benin, acting as a middle man, helped Neodis Trading-Benin buy from an Indian-based supplier 1,672 metric tons of rice at a price of $413.59/metric ton, filling 727 20-foot containers. We made a net profit of $69,150 out of the deal,” says Sounouvou.
Through the trade events, Sounouvou claims Exportunity has engaged with over 750 clients, and built a database of 85,000 companies globally trading with Africa.
“There are currently 13 transactions in the pipeline, over 450 suppliers trading on the platform, over 120 buyers  and over 2 million others are immediately reachable through our deal with UBA Bank.”
Running a successful business is not Sounouvou’s only pride. He was one of 500 young African leaders chosen to be part of President Barack Obama’s Young African Leaders Initiative in 2014, he was selected for the inaugural group of the Tony Elumelu Entrepreneurship Programme with a $10,000 grant, and has been recognized as the Ambassador of the Global Youth Innovation Network by the International Fund for Agricultural Development.
“Every time my leg hurts, I remind myself that I shouldn’t let it be my story. My story is to be great. My disability does not define me,” he says.
If nothing else, Sounouvou’s story proves that what hurts you can make you.

Pain, Pity, Opportunity

One of the major highlights for the Nigerian Stock Exchange (NSE) in 2013 was the launch of the X-Gen. It is a new trading platform that was introduced in a bid to improve and deliver a first-rate technology platform. The system will also enable the NSE to host other exchanges across the region and acts as a great impetus for new market participants to enter the African capital market space.
The NSE was established in 1960 as the Lagos Stock Exchange and as of December 2013 had 200 listed companies with a market capitalization of around $80 billion.
The NSE closed the year with two new equity listings on the main board, while the bond market recorded 19 new listings with an uptick in the value of new issues.
The bourse also had a re-launch of its Alternative Securities Market (ASeM) for small and medium companies. It introduced a new market structure for trading equities and Fixed-Income Market Making.
“In 2014, the Exchange’s primary focus will be on growing the capital market in preparation for achieving emerging market status. The NSE will facilitate access to and participation in the market; increase our footprint on the continent and deploy a risk framework to safe-guard the market venue,” said Oscar Onyema, the CEO of the NSE, at the exchange’s yearly review for 2013 and outlook projections for 2014.
“Our goal is to get promoted to the emerging market index,” he added.
The NSE started operations in Lagos in 1961 with 19 securities listed for trading. Data on listed companies’ performances are published daily, weekly, monthly, quarterly and annually.
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Nigerian_Stock_Exchange_7D_0001

The Floor Worth $80 Billion

The four gigantic clocks ringing the trading pit light up. The trollies squeak as they are wheeled under them.  A sweet scent wafts across the floor as the numbers count down.
This is the buyers chance to get the best price of the day. Hands hover above a small digital keyboard. Along the wooden benches, they line up with military precision. Cups of coffee are left steaming and forgotten.
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The aim of the game is to push the button at the last possible moment as the clock counts down to zero.
The clock counts down from R6 ($0.6). The auctioneers stare at the digits, oblivious to anyone around them. It hits R4.65 ($0.5) and stops. Every lily on the trolley is sold. The trolley squeaks away.
The chatter begins to rise again. Someone shouts: “Leave some for us next time boet, we all need to get lilies you know.” Then, heads turn to the next trolley.
Roses are wheeled in. The chatter stops. The game begins again.
This is all in a day’s work for auctioneer Tjaart Kilian. For him, getting up at dawn is a breath of fresh, scented air. He knows the rising sun means it’s time to sell a million flowers.
In a large warehouse in the industrial district of Johannesburg, South Africa, 60% of the country’s flower buyers haggle over a business that sees a turnover of R380 million ($3.8 million) a year.
There are 600 growers and 300 buyers. On exceptional days Multiflora ,the company that runs this floor, can pack 90,000 stems within five hours of going under the gavel. Valentine’s Day and Mother’s Day brings in R2.5 million ($253,000) on average.
In the middle of it all is André de Wet the managing director of Multiflora.
“We are tiny compared to the larger auctions in the world. South Africans are per capita very small consumers of cut flowers compared to Europe,” he says.
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Tiny compared to Aalsmeer Flower Auction in Holland, the largest flower house in the world, where up to 20 million flowers are sold a day.
On a chilly Johannesburg winter morning, the Multiflora warehouse is ringed by frosty fields. It’s cold inside too, but the colours are warm. In the air is the sweet scent of daisies, roses and lilies. Kilian knows his way around a complex maze of flowers, trolleys and red crates that keep the flower business moving; he should know he’s been here for 13 years.
“First impressions are everything for a flower. When you are classifying flowers you are looking for consistency and for little variation in quality. You check the flower, you check the leaves you check the stems. The size of the stem is a factor, if you hold a stem outward it must be able to carry the weight of the flower,” says Kilian.
The perfect flower crate will be given the letter C says Kilian. Beware the grower who categorizes his flowers incorrectly. Multiflora inspects every sellers buds daily. Should your stems be below par, they get re-categorized and suffer the penalty of being sent to the back of the queue. In a business where freshness and time is of the essence the penalty helps keep the seller honest says Kilian.
Before he started selling daises Kilian worked for 20 years as a service technician in a laboratory. He says his passion for plants blossomed at home, through a hobby of bonsai trees.
“When I had the opportunity I took it. You get tired of maintenance after 20 years. It’s a different experience when you get here. In the morning, with the smell of the flowers, it’s a whole lot different from the steel industry,” he says.
For auctioneers, the first days on the job are tricky. Not only do they have to gain an intricate knowledge of flora, which takes about six months, they also need to learn how the computer system works. Even with a healthy knowledge of plants in his back pocket, Kilian remembers ending his first day exhausted.  Take him to any flower shop these days and he will guarantee you get the best for your money. Most of the people who find out he is a flower auctioneer think he is crazy.
“The first thing they say is: ‘Can you speak fluently? Can you speak quickly?’&#8230; And it’s a completely different system from a normal auction. So when you say you auction flowers, they have got absolutely no idea what you are talking about,” he says.
Deep in the heart of the warehouse is a room with four gigantic clocks. At precisely 7AM, the sound of a bell beckons a train of flowers that go on sale. This is not your average clock. It is a digital clock that counts down cash instead of time. Starting at a high price, the hand drops until a buyer, by pressing a button, stops the clock to bid for a crate of flowers.
The system was invented by a Dutch cauliflower grower in the 1870s to reduce the time growers spent at auction says de Wet.
“It frees growers from the price determination process and the task of bidding and allows them to focus on production. The auction also provides a central location for buyers to meet suppliers, allowing for efficiencies in the logistics of product redistribution and quality control,” he says.
With the clocks in action, the auction can handle one transaction every four seconds.  All the information required for a buyer, quality and quantity, is on screen.
If the clock hits zero, the flowers are taken off the auction and then shipped to a dumpster to be destroyed. The company used to give unsold flowers away, but stopped after too many people began to re-sell them.
Buyers have a set budget for the day says Kilian. They work on a credit system and this seems to fuel the bidding process.
“Some of the guys run a very tight budget; they go mad over one or two rand per stem,” says Kilian.
There are four people who manage the clocks. Their job is to watch for betting trends and monitor the demands.
“Sometimes if you get a big demand for flowers, instead of the price going down it will go up.”
On days like Mother’s Day and Valentine’s Day the bidding war can push prices through the roof says Kilian. The auctioneer has got the option, if he sees the demand for flowers is high, to raise the prices even higher and into the next day if they think it’s worth it. Other peak demands are Tuesdays and Thursdays, the best days for buyers to ship their flower bunches to the airport and the coast ready for the weekend rush.
“That’s the experience of being an auctioneer knowing on certain days when to set the clock higher and who’s going to be buying that day. You have to be on top of it all the time. You have to sit there and concentrate each and every second. You cannot blink. You cannot make a mistake on the price. You have to concentrate… until the flowers are pushed,” he says.
Kilian enjoys playing mind games with the buyers by setting prices at higher costs when flowers are trending. Raising the prices keeps everyone on their toes and forces the bidders to think about how little they can pay before the flowers are gone.
Flower buyers are few. Auctioneers know everyone by name so they can guess who’s going to be buying what flower and adjust their prices accordingly. Nothing too overpriced, says Kilian with a wink.
Once the auction is complete, each bunch of flowers is tagged with a sale-sticker and then distributed to a buyer&#8217;s depot where they are repackaged and boxed for retail.
Every flower counts for Multiflora, who makes their money by charging 8% commission sales says de Wet. It knows competition is on the rise.
“Buyers for supermarkets and large retail store chains are becoming increasingly sophisticated, purchasing larger volumes and coordinating purchases across different markets and indeed, some large retailers are bypassing the auction and their commissions to source directly from growers,” says de Wet.
The journey of a stem can stretch from Nelspruit to Angola. Some customers fly their flowers across the continent; others sell them around the corner. All part of a million-flower-a-day business that gives off the sweet scent of millions of dollars.

The Sweet Smell Of Money

According to the landlords, contemporaries, teachers and neighbors who have lined up in front of the media in recent weeks, Kweku Adoboli was a sociable, intelligent and overwhelmingly ‘nice guy’.
The financial community in London remains awash with speculation about how that nice guy from the industrial coastal town of Tema, in Ghana, came to be in a position to lose the Swiss bank, UBS, more than $2 billion as well as its CEO.
Adoboli’s background speaks of privilege, but is unremarkable amongst his peers in the City. The 31-year-old son of a UN staffer was schooled at the fee-paying, Quaker-run Ackworth School in West Yorkshire, where he was deputy head boy.
<div id="attachment_193" style="width: 484px" class="wp-caption alignleft"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-193" class="size-large wp-image-193" src="/wp-content/uploads/2017/04/125271682-692x1024.jpg" alt="" width="474" height="701" />UBS Trader in court</div>
He studied computer science and business at the University of Nottingham before joining UBS, where he worked until 3:30 in the morning on September 15, when the City of London police arrested him at the offices of UBS in Finsbury Avenue. Later that morning, UBS announced that it had made a loss of $2 billion due to “unauthorised trading”. It later revised the figure upwards to $2.3 billion.
Adoboli remains in custody in London on two charges of fraud—for the periods October 2008 to December 2010, and from January to September 2011; plus two charges of false accounting—from October 2008 to December 2009, and January 2010 to September 2011.
Facing charges, Adoboli told a court that he was “sorry beyond words” and called his vast trading losses “disastrous miscalculations”.
Those miscalculations have called into question the survival of investment banking at UBS, as the bank decides whether to cut off a division battered by poor performance and scandal. Oswald Gruebel, the bank’s CEO, resigned over the affair on September 25.
As Adoboli’s LinkedIn profile shows, he worked on the investment bank’s European equity desk in London, trading “Delta One” strategies.
“Delta One” refers to the ‘delta’—or marginal difference—between closely correlated asset classes. By buying equities and hedging using derivative products or baskets of other assets, these computer-driven strategies mop up money through the inefficiencies in the market. It is highly complex, but is also supposed to work within tightly controlled risk limits. For every position the trader takes, he or she is expected to take a counter position—or hedge—of almost equal size.
The Swiss and British authorities are now investigating how Adoboli was able to evade the systems that monitor these limits to place directional bets. The results of those probes are likely to be months away, but the investigators will no doubt have seized on Adoboli’s CV and its startling similarity to that of the last headline-grabbing rogue, the French trader, Jerome Kerviel. Kerviel cost Société Générale, the French bank, $6.6 billion in 2008.
Starting in the bank’s “middle office”—the risk management IT department—in 2000, Kerviel made the jump up to trading in 2005, also on a Delta One desk. The bank’s comprehensive “Mission Green” report into the incident charts his activity from that point. He began to take directional bets that same year, probably to cover up the fact that he had been consistently losing using conventional strategies, the report said.
Kerviel used his knowledge of the bank’s risk systems to hide the fact that his positions were not hedged, creating fictitious counter trades by buying securities with deferred start dates or with counterparties that did not require immediate confirmation. Using passwords from other SocGen employees, he was able to go back into the system and remove the trades, fooling the risk monitoring tools. It worked for more than two years and reaped a fortune.
In January 2008, though, Kerviel was found out. He had amassed directional positions in European stock indices totalling almost €50 billion ($6.6 billion). The day that the bank began to unwind these positions was “Black Monday”, January 21, when UK, European and Asian markets fell dramatically.
That he was found out in a period of acute market stress is not a coincidence. The hedge fund, Long Term Capital Management, collapsed after the Russian sovereign debt crisis in 1998. The world’s most famous rogue, Nick Leeson, whose limit-busting trades out of Asia brought down Barings Bank, was shaken out in the aftermath of the 1995 Kobe Earthquake. Both events saw highly volatile markets with large price movements.
Like Kerviel at SocGen, Adoboli began his career at UBS in the bank’s IT department, maintaining and managing those same risk systems that were supposed to keep traders in check. Whether he used that knowledge will likely be a thrust of the investigation against him.
While systems and practices differ between banks, traders often admit that limits really are flexible. There are often subtle ways for traders, with good reputations, to go around the risk management practices that, while they reduce the potential for losses, also constrain a trader’s ability to take educated punts when they have a strong conviction.
This, cynical traders say, is why rogues can get away with deceit for long periods: no-one gets fired for winning. It is only when they lose that they have to “go write the book”—that is, be escorted out of the building by security at best, or the police.
Kerviel was, according to SocGen, at it for years. Leeson began his rogue activity in 1992, initially winning big before his fortunes turned and he began to hide his losses in the now infamous account number 88888. Adoboli’s charges—for which he has not entered a plea—cover almost four years.
Traders are understandably reluctant to go on the record about their peers who ‘go rogue’, but as more than one hinted, if you are considered good enough, hard boundaries get softer. If you break the rules and lose, though, you are on your own.

Tag: Trading

FORBES AFRICA SOCIAL MEDIA

Trading On Technology

Pain, Pity, Opportunity

The Floor Worth $80 Billion

The Sweet Smell Of Money

From Ghana, To London, To A Cell – Africa’s Rogue Trader