[ M A R K E T
number of available direct sub-custody
providers becomes very limited.”
Like any industry sector, this situation
comes down to whether there is enough
sustainable business to warrant the time
and resources to set up a sub-custody
business. “With the exception of South
Africa - and maybe Nigeria and Kenya
- the markets are not sizeable enough
to have multiple competitors and active
competition as global custodians may
prefer,” says Bogart Miheaye, regional
head of network management for West-
ern Europe, Middle East and Africa for
BNP Paribas Securities Services. “It is
essentially a matter of volume. In smaller
markets, we could argue that it does not
make sense to have more than one pro-
vider and it may not prove to be beneficial
for clients in a small market.”
It would, however, be unfair to as-
cribe the relative underperformance of
sub-Saharan markets as due to inertia
on the part of the relevant stakeholders.
Indeed many of the markets are taking
steps to upgrade their market infrastruc-
ture to meet the requirements set out by
institutional investors. This should, in
principle, enable existing sub-custodians
to enhance their offering, while nurturing
greater competition.
In the case of Nigeria, for example, the
authorities are have been working on
implementing the automation of issuance,
storage and administration of the Certif-
icate of Capital Importation (CCI), the
document governing inflows and outflows
of FX for investment purposes.
“The enthusiasm exists across the
region to adopt and implement interna-
tionally recognised best practice, e.g.,
shortening settlement cycles to T+3,
introducing new CSD systems to reduce
manual processing and associated risks,”
says Roy.
Legislative and infrastructural innova-
tion is not, however, limited to the larger
African markets. In Botswana, for exam-
ple, the BSE is considering the introduc-
tion of market making on the bourse and
have come up with market making rules.
These rules have been framed to provide
liquidity in listed securities by submitting
both bids and offers for a designated secu-
rity during the designated Market Making
session. The rules are currently awaiting
regulatory approval.
R E V I E W
|
A F R I C A ]
“The markets are not
sizeable enough to have
multiple competitors and
active competition as global
custodians may prefer.”
BOGART MIHEAYE, REGIONAL HEAD OF
NETWORK MANAGEMENT FOR WESTERN
EUROPE, MIDDLE EAST AND AFRICA FOR
BNP PARIBAS SECURITIES SERVICES
Summer 2017
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