GSE expands market; introduces automated OTC Trading platform for unlisted securities

  • expected to drive efficiency, price discovery
  • with RCBs, others primed to benefit

Ebenezer Chike Adjei NJOKU [email protected]

Building on the momentum of its successful commercial paper market launch, the Ghana Stock Exchange (GSE) has launched its first regulated platform for trading public securities not listed on the stock exchange – a formal, automated Over-the-Counter (OTC) trading platform.

OTC stock trading offers an alternative marketplace for companies to trade their shares outside the traditional exchanges. The ‘unlisted’ securities allow smaller firms to raise capital and enter the market faster.

While informal OTC markets have existed for a while, they have been characterised by inefficiencies, limited transparency and accessibility.

During the launch event, Managing Director-GSE, Abena Amoah, underscored the importance of this new platform in addressing inefficiencies of the existing OTC processes.

“Our efforts to bring together the first regulated platform for trading in public securities that are not listed on the stock exchange aims to provide a structured, transparent and efficient environment for trading these securities,” she noted.

The OTC market’s introduction, Ms. Amoah added, is expected to benefit unlisted public companies by providing them with greater visibility and more trading opportunities. It also aims to offer investors a more straightforward way to transact.

“Introducing the GSE OTC market is a testament of our commitment to innovation, efficiency and providing unparalleled opportunities for raising capital and for investments,” the MD stated.

This initiative is part of a broader strategy as captured in the Securities and Exchange Commission’s (SEC) 10-year, Capital Market Master Plan, to offer more diverse investment opportunities and enhance liquidity in the market.

The Managing Director is optimistic that the OTC market will support economic growth and assist small- and medium-sized businesses (SMEs) which do not meet  listing requirements of the main exchanges, particularly as they will not be subject to an admission fee.

“We believe today’s OTC market will drive economic growth and support SME businesses that may not meet the listing requirements of any of our main exchanges, and therefore become relevant to Ghana’s economic development,” he added.

Of those in this category, she was especially convinced that rural and community banks (RCBs) which are already active in the OTC market will be some of the earliest and biggest beneficiaries.

Echoing these sentiments, Managing Director-ARB Apex Bank, Alex Kwasi Awuah, highlighted the OTC market’s transformative potential.

“We believe that this will offer our member-banks the flexibility they need in both short-term and long-term funding to enhance rural solvency and support their operations’ expansion,” he explained, adding that the platform will offer all active members of the 147 RCB fraternity an opportunity to undertake real-time OTC trading in their shares.

ARB Apex Bank MD Awuah is equally optimistic that the new market will not only increase liquidity for rural and community banks but also help improve their governance systems, reinforcing reforms already implemented by the Bank of Ghana.

“We believe that this will ultimately strengthen the financial stability of all participating banks,” he noted.

With RCBs often struggling with raising capital due to limited sources and the seeming unattractiveness of their shares to otherwise sophisticated investors, the new market will alleviate these issues by providing a platform where the true value of bank assets can be determined – potentially leading to capital appreciation for shareholders.

“By this, we can determine the true value of our banks’ assets, and this could lead to capital appreciation for shareholders of our banks that are going to be on this market,” Mr. Awuah explained.

Furthermore, the OTC market offers access to a broader range of equities and instruments, enhancing the attractiveness and competitiveness of participating banks, Mr. Awuah added.

He expressed confidence that the initiative will lead to significant improvements in financial performance and investor confidence.

“Participating in the OTC market can enhance our member-banks’ competitiveness and position them for future growth and success in the financial services industry,” noted.

This comes as the traditional market continues its positive run. At close of trading in the penultimate week of June 2024, the benchmark GSE Composite Index (GSE-CI) had reached 3,788.84 points – representing  a 4-week gain of 1.01 percent and a year-to-date (YtD) gain of 21.04 percent.

Similarly, the GSE Financial Stocks Index (GSE-FSI) had gained 2.33 percent over the previous four weeks with a YtD gain of 10.32 percent. The GSE’s market capitalisation at the period’s end was GH¢84.5billion.

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