The Ethiopian Capital Market Authority (ECMA) has issued three directives aimed at strengthening the regulation of capital markets in Ethiopia. The directives cover the licensing and operating of securities exchanges and trading platforms, the recognition of self-regulatory organizations (SROs), and the licensing and supervision of capital market service providers (CMSPs).
The directive on licensing and operating securities exchanges and trading platforms sets out the regulatory requirements for the establishment and operation of securities exchanges, derivative exchanges, and other trading platforms and facilities. It also provides the legal framework for ECMA to “effectively and efficiently” license and regulate capital market services providers.
The directive on recognition of SROs sets out the criteria for SROs to be recognized by ECMA. SROs are independent organizations that are responsible for setting and enforcing rules for their members. They play an important role in ensuring that capital markets are fair, efficient, and transparent.
The directive on licensing and supervision of CMSPs sets out the requirements for CMSPs to be licensed by ECMA. CMSPs are entities that provide services to investors, such as brokerage, investment advisory, and underwriting services. The directive aims to ensure that CMSPs are properly regulated and that they provide high-quality services to investors.
The directives are a significant step forward in the development of Ethiopia’s capital markets. They will help to ensure that securities exchanges and trading platforms are properly regulated and that they provide a fair and orderly market for investors. The directives will also help to ensure that there is a strong regulatory framework in place to protect investors and to promote the development of the country’s capital markets.
The directives are open for public feedback, which will help to ensure that they are effective and meet the needs of stakeholders.
“The launch of these directives is a significant step forward in the development of Ethiopia’s capital markets,” said Brook Taye, Director General of the ECMA. “These directives will help to protect investors, ensure market integrity, and promote the development of the country’s capital markets.”
Brook Taye, Director General of the ECMA
Directive 1:
- Directive on Licensing and Operating Securities Exchanges and Trading Platforms:
- Securities exchanges and trading platforms must be licensed by the ECMA.
- The directive defines a number of terms related to capital markets, such as “Capital Market Service Providers”, “Services Licenses”, “Insider Trading”, “Investment”, “Investment Instruments”, “Investment Policy Statement”, and “Know Your Customer/Client (KYC)”.
- The directive sets out the functions and authorized activities for service providers, as well as the terms and conditions that accompany them.
Directive 2:
- Directive on Recognition of Self-Regulatory Organizations (SROs):
- The directive sets out the criteria for SROs to be recognized by ECMA.
- SROs are independent organizations that are responsible for setting and enforcing rules for their members.
- They play an important role in ensuring that capital markets are fair, efficient, and transparent.
Directive 3:
- Directive on Licensing and Supervision of Capital Market Service Providers (CMSPs):
- The directive sets out the requirements for CMSPs to be licensed by ECMA.
- CMSPs are entities that provide services to investors, such as brokerage, investment advisory, and underwriting services.
- The directive aims to ensure that CMSPs are properly regulated and that they provide high-quality services to investors.
Impact and Future Outlook: The introduction of these three directives by Ethiopia’s Capital Market Authority is expected to have a transformative impact on the country’s capital market. By focusing on investor protection, market transparency, and capital market development, the ECMA aims to create an environment that attracts investments and supports sustainable economic growth. The successful implementation of these directives will rely on effective communication, robust monitoring, and proactive measures by the ECMA.
As the directives are gradually implemented, market participants should closely monitor the updates provided by the ECMA through its official website for detailed guidelines, regulations, and timelines. It is important for market participants to align their practices and operations with the new directives to ensure compliance and take advantage of the opportunities presented by an evolving regulatory framework.
