Wednesday, June 12, 2024
BusinessExperts urge gov’t to establish Stock market Intelligence System

Experts urge gov’t to establish Stock market Intelligence System

Financial experts urged the government to develop a strong intelligence system along with establishing a stock market.

A public hearing on the draft capital market bill was convened by the Parliament’s revenue, budget, and finance standing committee on Wednesday.

During the discussion, experts from various sectors raised their concerns about insider trading, brokers and employees with external relations that might jeopardize the trust of the established stock market, unless it is managed properly from its inception.

They pressed on the paramount importance of establishing a strong intelligence service along with the ongoing institutional establishment. Participants cited the risk of confidential information leaks about stock trades, ultimately spoiling the trust of the stock market.

“Thinking of the stock market, it is very secretive and complex but the information inside the market is available for employees and managers or staff. So, in this case, there has to be a tracing mechanism to make transparent business among traders,” said Abush Ayalew (MD).

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“As information is a crucial instrument in the stock market, it should be provided fairly to all traders, and at the same time, traders should get the information via the proper channels when they trade,” he added. 

Dr Abush, on the other hand, mentioned that when a certain individual is a stock market trader and at the same time he/she is a stock market employee, the information should be equally available, both for internal employees and external traders.

“In such instances, if there is no strict controlling mechanism or rules of engagement for inside traders and outside traders, the competition would be unfair and trust and confidence would vanish,” said Dr Abush. He added “Trust and confidentiality should not be taken as simple issues and it has to be strictly incorporated in the bill or outlined in the next implementation directive.”

Another participant from the Ethiopian Chamber and Sectoral Associations, Binyam Haile, shared the frustration of others by indicating the potential impact of insiders leaking information to outside traders.

“When a certain employee is recruited for the stock market he/she must keep confidentiality that would otherwise be backed by a certain level of criminal punishment,” said Binyam.

When the stock market becomes active, after the draft bill is ratified by the parliament, a strong law and punishment mechanism must be applied, he said.

Insider information on stock is an advance tipoff on particular stock from someone who is in a position to know. It could be from an investor, lawyer, or a stockbroker to help the investor make profit.

The Ethiopian stock market establishment bill, drafted by the National Bank of Ethiopia (NBE), is under review by the parliament and is expected to be approved before the end of the current Ethiopian fiscal year.

The bill has incorporated experiences of the United States of America, Singapore, Kuwait, Kenya, Uganda, and Rwanda.

[speaker]
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