Stock Market in Ethiopia

Reference: Capital-Market-Proclamation of Ethiopia-No.1248-2021

What is Stock Market or Capital Market?

Capital Market is a market where securities such as shares or equities, bonds, derivatives, or other related securities are bought and sold.

Share is a portion of ownership interest in a share company, or an interest or stake in any collective investment scheme.

Securities are any instrument – in any legal form – that evidences ownership of a share in a financial transaction and that is negotiable pursuant to approval from the Authority, such as:

a) Shares issued or proposed to be issued in the capital of a company;

b) Any instrument that creates or acknowledges a debt issued or to be issued by a company;

c) Loans, bonds, and other instruments that can be converted to shares in the capital of a company;

1. d) All public debt instruments that are tradable and issued by the Government and other government entities;
2. e) Any right or derivative contracts relating to securities (such as options and futures);
3. f) Units in a collective investment scheme;
4. g) Any paper or instrument considered by the Authority as a security for the purposes of implementing this Proclamation

but does not include commercial papers such as cheques, promissory notes, bills of lading, letters of credit, cash transfers and instruments negotiated by banks exclusively between each other, insurance policies and rights arising from retirement funds established for the benefit of the beneficiaries therefrom.

How Stock Market Works?

“Publicly Traded Security” means a security traded on a securities exchange or through over-the-counter markets;

Regulated Capital Market Activities and Services

The following capital market activities shall be regulated under this Proclamation:

1. a) Buying, selling and dealing in securities,
2. b) Investment advice,
3. c) Underwriting,
4. d) Fund management,
5. e) corporate finance advice relating to acquisitions, mergers, divestures, combinations and other activities that involve buying, selling, and exchanging securities,
6. f) Custodial services,
7. g) Collective investment schemes,
8. h) Credit rating services, and
9. i) any other activity deemed by the Authority as a regulated activity pursuant to this Proclamation.

Regulated capital market activities shall only be undertaken by the following persons who hold a capital market services license for that activity:

1. a) Securities Broker,
2. b) Investment Adviser,
3. c) Collective Investment Scheme Operator,
4. d) Investment Bank,
5. e) Securities Dealer,
6. f) Custodian,
7. g) Market Maker,
8. h) Credit Rating Agency,
9. i) Appointed representative of a capital service provider, and
10. j) Any person who conducts or participates in any activity that is deemed by the Authority to be an activity in securities to be regulated in accordance with the purposes of this Proclamation.

How do i participate in Stock market in Ethiopia?

Capital Market Participants are capital market service providers, issuers of securities, investors, and securities exchanges, eligible counter parties to eligible contracts, and securities depository and clearing companies.

Securities Exchange means, in relation to premises of a licensed securities exchange, the one place in those premises which constitutes, maintains or provides a market or a facility by means of which:

1. a) Offers to sell, purchase or exchange securities are regularly made or accepted;
2. b) offers or invitations are regularly made, being offers or invitations that are intended, or may reasonably be expected to result, whether directly or indirectly, in the making or acceptance of offers to sell, purchase or exchange securities;
3. c) information is regularly provided concerning the prices at which, or the consideration for which, particular persons or particular classes of persons, propose, or may reasonably be expected, to sell, purchase or exchange securities; or
4. d) Clearing service for securities traded in the exchange takes place;

Who are Stock Market Service Providers?

“Securities Broker” means a person who conducts the business of purchase and sale of securities for the account of others in consideration of a commission.

“Securities Dealer” means any person who engages either for all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person.