Interoperability among FMIs

Promoting interoperability among FMIs in Sub-Saharan Africa

By Abiodun Adebimpe

As stock markets in Sub-Saharan Africa continue to mature and grow in complexity, trading platforms and Financial Market Infrastructures (FMIs) should embrace the potential of interoperability.

Interoperability refers to the mechanism through which brokers and/or investors can choose any clearing corporation to settle their trades, regardless of where those trades were executed. While this translates to greater efficiencies in other markets, it has a specific benefit to markets in Sub-Saharan Africa that, while fast growing, could benefit from further acceleration through technology.

Interoperability will help the industry break away from silos, meaning that platforms can readily share information with one another, leading to an improved market and enhanced trading practices. Great efficiencies and sophistication in the market will also secure better investment flows from around the world.

As a proud pioneer of innovative ideas, RMB has noted the benefits of interoperability to investors, securities service providers, FMIs and regulators for several years. These benefits have been seen in the form of operational efficiencies, lower transaction costs, reduced operational risks and higher transaction flows. If multiple institutions open up their technology, it allows for a shift from manual to more integrated digital processes. This dramatically reduces the risks associated with manual processes and opens up the market to interconnected, better investment flows from around the world.

As markets grow and diversify in Sub-Saharan Africa, now is a critical moment to embrace interoperability. Most of the markets are currently not large enough in terms of size and value to warrant the current infrastructure multiplicity in which exchanges and central securities depositories (CSD) exist in silos. Ideally, a trader and/or an investor should be able to trade on one exchange and have it cleared and settled on another CSD because all the exchanges and CSDs in the trader’s market are interconnected.

However, there are currently some challenges to realising interoperability in these markets. For instance, inadequate operational/regulatory frameworks prevent operators from making headways as far as interoperability is concerned while regulators struggle to effectively supervise the markets and ensure that required cyber security precautions are in place.

RMB is committed to pioneering market interoperability in Africa. As such, we have committed time and resources to market development, advocacy and creating best practices. In Nigeria, for example, we are well-respected by regulators and were instrumental in issuing a regulatory framework as far back as 2021. We are also actively engaging with CSDs and collaborating with other securities services providers.

Now is the time to embrace interoperability. Not doing so will keep markets fragmented, complex, manual, expensive and disconnected from the international economy.

Abiodun Adebimpe is West African Head of Custody Services at RMB