MARKET DATA REVIEW: The relevance of mobile trading to the stock exchange
Millions of ordinary Tanzanians still believe that investing in publicly traded stocks, bonds and other securities is for their few well-connected counterparts.
They believe the business is reserved to the few lucky ones who possess the technical means of accessing the stock market including the education, the technological sophistication and also the wealthy ones who reside in Dar es Salaam.
As things stand, participating in the stock market for trading and investing purposes at the bourse remains a long and complicated affair for many in the society.
This shouldn’t be the case though, especially at this time and age, where it is expected that the penetration of Information and Communication Technology (ICT) should significantly enhance efficiency and widen access to the financial markets, including the financial products that are listed and traded in stock exchange such as stocks (shares) and bonds — both Treasury bonds issued by the Government and corporate bonds issued by private companies.
Back in the 1700s/1800s, the stock exchange concept was at its nascent stage — but with the industrial revolution during this period, collective investment approaches and partnerships seemed one of very few way out for financing industrialisation — however, it was during this time that traders and investors in the stock markets dedicated entire days to travel to specific locations where they could have proximity to markets where there are actions and news that would impact their activities of buying and selling of securities and other assets. The situation was especially worse for investors trying to obtain access liquidity and opportunity via investing in various assets classes.
Then things changed for the better overtime — the turning point came when traders and investors, fatigued by gathering under the buttonwood tree on the Wall Street in New York City to exchange stock and other assets, formed the New York Stock Exchange. The action of establishing a formal market for exchanging their securities assured them of round the clock access to the exchange and its prospects.
From those days on, trading and investing in the stock exchange remained preserved for dedicated few traders and large institutional investors (pensions funds, mutual funds, investment management companies, etc) that could assure large trade volumes. This was the case until as recent as 1990s, when technological revolution and its related development, driven by the internet and ever-changing customer needs in this trend. The floodgate opened for retail traders and investors to gain direct access to stock markets. In developed markets as well as in emerging and some frontier markets, especially in Asia — individual retail investors have direct access to stock markets, even though there are are some who still uses the services of stock brokers and fund managers, in collective investment schemes or mutual funds.
As it is, we are currently in the midst of a defining moment for innovation in the financial services, largely driven by interlink of mobile phones technological development and financial services. This is reshaping some aspects of savings, funds transfer and investments experiences for many mobile phones users. As a result of this, the idea of trading and investing in the stock market from a remote location while putting orders for trade is no longer a fantasy, or a distant idea. In our case, this phenomenon has not been lost — in 2015 we introduced the mobile phone trading services (“Hisa Kiganjani”) in our trading platform where traders and investors could use the Africa’s first-ever USSD-based mobile trading platform (*150*36#) to buy and sell shares directly on the Dar es Salaam Stock Exchange (DSE) in addition to accessing real-time market information. Under this arrangement, we envisaged that mobile trading could be the new frontier in the stock brokerage space, we saw this as low-hanging fruits on the aspect of interlinking the mobile phones technology in making the stock exchange products and services readily and efficiently available to many during this digital revolution age.
Our projections were, and we thought justifiably, that the time is ripe for the mobile trading platform to provide the necessary fillip that could be brought by mobile-trading revolution. We thought we could not expect different results using similar approaches that had historically resulted into decimal achievements. We thought that, yes there has been an increase in the number of brokerage firms (from 7 brokerage firms in many years to the current 11 brokerage firms). However, given the history of a small number of Tanzanians with trading and investing accounts at the DSE (only about 500,000), and that since all stock brokers are located in Dar es Salaam, that since there are about 40.5 million Sim cards (as per recent data by Tanzania Communications Regulatory Authority (TCRA), that such a trading platform will ensure convenience and accessibility to DSE to the masses, that the DSE platform would be accessible to any investors (and the would be investors) with a mobile phone, that with the mobile trading concept for trading and investing would help bridge the gap and that transactional and operational costs would be reduced, that given the transaction volume in the mobile money platform (where about Sh45 trillion are transacted — in the form of payments and transfer in the mobile phones annually). We thought we had a strong case to pursue the route of mobile trading as it makes business and economic sense, given the returns in efficiency that it could bring forth to stock traders and investors.
Now, looking at the lens of the two years’ experience, retrospectively, one would easily argue that this technology has not spawned the trading and investment transformation or improve the trader and investor experience as they interface with the stock market. Why? There are several causes to this effect, of which I will write on, in future articles — i.e. there are ample knowledge building requirements, there are needs for addressing the motivation factor for stockbrokers, perfecting the operability of the platform itself, the issues of accessing the market in the mobile platform while using virtual stock brokers needs to be re-looked at, and the necessity of integrating research tools into the platform — e.g. online news , price feeds from the exchange, corporate action announcements, etc. However, for today, the objective real is to re-emphasis the necessity of technological revolution to the capital market space. At this time ad age, it is difficult to afford waiting for a perfect environment and for perfect solution so we can take action — there has to be an element of enterprising in all of these, for the growth and development to be evidenced. For example, the necessity for traders and investor being spared with the inconveniences and inefficiencies related to physical visit to stockbrokers offices, which are only located in Dar es Salaam cannot be overemphasised — traders and investors should be given direct access to the market so that they can transact without to physically visit brokers as long as there is transparency which is the most concern to both investors and regulators.
