The Uganda Securities Exchange (USE) has received formal approval from the Capital Markets Authority (CMA) to operate a demutualized stock exchange in accordance with the requirements of the Capital Markets Authority Amendment Act 2016 and the Capital Markets Authority Establishment of Stock Exchange Amendment Regulations 2016.
This means that USE will become a company limited by shares with a change in its governance and managerial structure.
Demutualization means the process by which a customer owned mutual organization or co-operative changes legal structure to form a joint stock company.
This will allow for an independent, transparent and flexible governance structure that fosters decisive action in response to all the changes in the exchange’s operating business environment.
Speaking during a press conference in Kampala today Paul Bwiso, the USE Chief Executive Officer noted that efforts to demutualize the Exchange have been underway since 2007.
“The approval of the demutualisation marks a great milestone for the USE and the Ugandan capital markets as a whole,” noted Bwiso
This, he said, means growth for the exchange and the ability to attract strategic investors to the sector which places us in a better position to facilitate the growth of businesses and the Ugandan economy as a whole.
Demutualization is expected to improve the stock exchange’s governance and deepen the capital markets.
“It also brings the local exchange at par with the regional stock markets that are already demutualized as well as meeting international standards for the operation of an efficient stock exchange”.
In Kenya, the Nairobi Securities Exchange demutualized in September 2011. The Dar es Salaam Stock Exchange demutualized in June 2015 while the Rwanda Stock Exchange was demutualized from the start as it was registered as a company limited by shares in October 2005 before being officially launched in January 2011.
“As a demutualized entity that is profit-seeking, the USE will capitalize on new income opportunities by being innovative and creative while diversifying away from the traditional stocks and bonds into derivatives and EFT’s,” noted Bwiso
Moving forward, the trading participants (stock brokers) will be required to reduce their shareholding to no more than 40% within the next three years while no single member will be allowed to hold more than 10% of the issued shares at the exchange.