Ethiopia sets the stage for its first securities exchange with new licensing directive

Addis Abeba – The Ethiopian Capital Market Authority (ECMA) has taken a step towards establishing a fully functional capital market in the country.

On 16 July, 2024, the Authority issued a directive titled “Directive on Licensing, Operation, and Supervision of Securities Exchanges, Derivatives Exchanges, and the Over-The-Counter Market.”

This directive outlines clear guidelines and requirements for obtaining licenses to operate both securities exchanges and over-the-counter markets, according to a statement released by the Authority.

It also establishes a robust supervisory framework for these exchanges, detailing the internal regulations, reporting obligations, and standards that will govern their operations.

According to the Authority, this initiative is expected to create a more favorable environment for businesses to raise capital.

“It will facilitate financing for significant projects while establishing a transparent and controlled trading system,” reads the statement. “Licensed service providers will be able to buy and sell securities within this regulated market.”

The directive also consolidates Ethiopia’s previously fragmented securities trading landscape into a single, licensed, and regulated market. “This integration is anticipated to significantly enhance the capital market sector’s contribution to stakeholders and the national economy,” the ECMA stated.

Officials also emphasized that the directive paves the way for the Ethiopian Securities Exchange (ESX) to officially begin operations.

In a recent interview with the Addis Standard, Brook Taye, Director General of the ECMA, revealed that the inauguration of the ESX is scheduled for November 2024.

Director General Taye confirmed that most of the preparatory work for launching Ethiopia’s first full-fledged capital market is already finalized.

This includes the development of a comprehensive regulatory framework, the creation of a long-term capital market development roadmap, and the review of regulations for institutional investors.

Established in 2021, the Ethiopian Capital Market Authority is tasked with fostering the development and regulation of the capital market within Ethiopia. AS