Rwanda OTC Market.doc by wangnuanzg



 Rwanda over the counter (OTC) market


          The Capital Market Advisory Council [CMAC] was established by the Prime Minister’s
          decree of March 2007, to guide in the development of a capital market in Rwanda.

          The Council
          The board of Capital Market Advisory Council consists of 11 non-executive directors or
          council members representing different interest groups appointed by the Minister of
          Finance. The board works through periodic board and committee meetings and is
          answerable to the Minister of Finance.

          CAMC Secretariat
          The day to day business of CMAC is run by the management headed by an Executive
          director and senior technical staff housed at the CMAC secretariat on 5th Floor Ecobank
          Building in Kigali.


      NAMES                       OCCUPATION            INSITITUTION             SECTOR
1.    Mr. Henry Gaperi            Managing Director     National     Social      Pensions
      (Chairman)                                        Security      Fund
2.    Mr. Mark Rugenera           Managing Director     SORAS                    Insurance Companies
3.    Mr. Gregoire Muramira       Managing Director     Optimum                  Insurance Brokers
                                                        Insurance Brokers
4.    M r. David Kuwana           Managing Director     BCR                      Banking
5.    Mr. Vincent Munyeshyaka     Director of Corporate MINECOFIN                Ministry of Finance

6.    Mrs. Henriette Zimurinda Managing       Director Vision Services Ltd       Private sector
                               (Chairperson Women
7.    Mrs.              Yvonne Advocate                IMPRIMERIE                Bar Association       of
      Mukankuranga                                     NOUVELLE                  Lawyers
8.    Mrs. Adelaide Kagwesage Head     of    Financial BNR                       Banking
                               Market Division         Central Bank
9.    Mrs. Door Plantenga      Managing Director       BRALIRWA                  Breweries
10.   Dr. James Ndahiro        Member of business MINIJUST                       Ministry of Justice
                               law Reform Cell

11.   Mr. Emmanuel Hategeka      Secretary General         PRIVATE SECTOR Private         Sector
                                                           FEDERATION     Advocacy Body
12.   Mr. Robert Mathu           Executive Director        CMAC           Capital Markets

         What is capital market?
         A financial system is generally comprised of the money market and the capital. The
         money market is the market for short dated financial products or instruments like, term
         deposits, certificate of deposits, commercial papers, treasury bills, repurchase
         agreements (REPOS), foreign exchange etc. The money market is mainly dominated by
         commercial banks as the key intermediaries.

         A capital Market is a component of the financial sector and securities traded in the
         capital market are usually long dated financial instruments like; Treasury Bonds,
         Municipal Bonds, Corporate Bonds and debentures, Shares or stocks issued by

         Primary Market
         The capital market is further divided into primary and secondary market. The primary
         market is the market for new issuers or where new capital is raised. It is the market
         where securities are sold for the first time. At the primary market sale proceeds of the
         securities offered flow directly from the buyers or investors to the issuers of the

                   Primary Market Transaction Process

                              Issuer offers
                         Decides to raise capital

                        Issuer appoints advisors

                         applies to CMAC to list
                          securities on the OTC

                        Public investors subscribe
                         to securities during the
                               offer period

                        Issuer is admitted to list on
                             the OTC Market

                       Secondary Market Trading

Secondary Market

The secondary market is the market for trading securities that have been sold or issued
in the primary market and already in the hands of the public. Once securities have been
successfully issued in the primary market, they are subsequently traded in the
secondary market. This is where stock markets, stock exchanges or OTC markets by
whichever name the market may be referred to, provide the facilities for secondary

The secondary market, provide a very important complement to the primary market. An
active secondary market makes it easier for corporate entities and Governments to raise
fresh capital through the primary market.

Trading Operations

The Capital Market Advisory Council has established an Over the Counter (OTC)
trading operations. Rwanda OTC secondary trading is conducted through a dual
process. Members trade through an Over the Counter market where a member is
allowed to buy or sell directly to clients in their offices. Equally members are allowed to
transact with other members either face to face or through the telephone throughout the
working hours of the normal working days. In addition, an open outcry trading session
is conducted at the trading floor.

During the designated trading floor sessions at the CMAC secretariat, all members must
report all their transactions that they conducted from the closure of the previous official
trading session up to the time just before the beginning of the next trading session.

               Secondary Market Transaction Process

Buyer Client                                Stockbroker

                                             CMAC                              Registrar

 Seller Client                              Stockbroker

  1. Buying client or selling client approaches stockbroker, opens an A/c and pays for
     an order; either provide funds or give securities to broker and broker

  2. If buying broker has securities or sell order for securities sought or, required at
     ordered price, broker sells directly to the client

  3. If buying broker has no selling orders for securities and or price given by sellers,
     the broker contacts the other brokers seeking securities required.

  4. Buying stockbroker and selling stockbroker attends trading sessions at the
     trading floor. All stockbrokers attend the session and all report:
         (i)    traded securities – prices, volumes and securities
         (ii)   Buying orders outstanding positions –price, volumes and securities
         (iii)  Selling orders outstanding positions –price, volumes and securities

   5. CMAC compiles market report and distribute to the market and Public through
      the media.

   6. On settlement day, CMAC clears the trades for settlement of securities against
      funds between stockbrokers.
   7. CMAC sends matched transfers to the Registrar for registration and change of

   8. Selling stockbroker pays the selling client

   9. Registrar transfers ownership from the seller to the buyer.

   10. The buying stockbroker delivers the new bond or share certificate to the
       Buying client.

At the beginning of every trading session, all members shall be required to report and
display their existing and outstanding buying and selling positions for all the securities
that they have orders for. This will be equivalent to presenting their order books.
Trading is conducted by the members’ representative calling out their highest bids
(buying positions) and their lowest offers (selling positions).

In addition, the members/traders must also call out all transactions that they had
executed in their offices immediately after the last trading session and immediately
before the opening of the current session. Transactions on the trading boards will be
concluded when the first two counterparty bid price and the offer price are the same

The CMAC secretariat will record these transactions as sales for the day and prepare a
market report to members and the public.


          Settlement is the delivery of funds or payment for securities bought and delivery of the
          securities sold.

          T+3 for Bonds.
          Transactions on Bonds or Debt securities are settled three days after the transaction date,

          T+5 for Equities.
          Equities or Shares transactions will be settled five days after the transaction date, T+5

          The requirement for deliveries to be made on specific days and at specific times of the
          day is there to ensure that transactions’ clearing is undertaken systematically for
          purposes of settlement of securities and funds. The shorter the settlement period the
          more near cash an asset is perceived to be.

          Any person can apply for membership as a stockbroker, dealer, and sponsor under OTC
          market provided they meet and adhere to the rules and conditions of CMAC.

          Membership Admission Requirements

Category                  Eligibility       Net worth            Citizenship    Functions
Stockbrokers              Corporate         Minimum funds        Incorporated   1.Investment appraisals
                                            committed for        in Rwanda      2.valuations of securities
                                            the OTC                             3.Participation in buyout
                                            operations                          deals
                                            Rwf.10 million                      4. IPOs
                                                                                5.Stockbroking activities
                                                                                6.Investor services
Dealers                   Individual        Rwf.5m               Legally     1. 1. Dealing activities
                                            individual           resident in 2. 2. Market making
                          Corporate                              Rwanda or 3. 3. Investor services
                                            Rwf.8m               incorporated   4.participation in buy outs.
                                            Corporate            or registered
                                                                 in Rwanda
Sponsors                  Corporate         Min. funds           Legally     1. 1.Participation in buyout
                                            committed to         resident in    deals
                                            CMAC OTC             Rwanda or      2. Appraisal of and
                                            operations           registered or  evaluation of proposals
                                            Rwf.10m              incorporated3. 3. Sponsor IPOs
                                                                 in Rwanda      4. Appoint market makers
                                                                                for issues sponsored


REQUIREMENTS                             CRITERIA
                                             An issuer is admitted to the Official List of
Official List                                 the capital market as long as its securities are
                                              listed on the OTC market.

                                               Every new applicant for listing must be
Sponsorship                                     sponsored by a participant of the capital
                                                market who is on the approved list of
                                                sponsors maintained by CMAC
                                         Every issuer must appoint a nominated adviser who
Nominated Adviser                        may be
                                             A person listed on the approved list of
                                                nominated advisers maintained by CMAC;
                                             Its sponsor,
Incorporation                            The issuer must be a corporation:

                                                duly incorporated or otherwise established
                                                 in accordance with the laws of Rwanda; or

                                                Registered under the Company’s Act to
                                                 carry on business in Rwanda.
Minimum number of shareholders           50 for equities at time of listing
Minimum spread of shares to the public   25%
Minimum Paid up capital                  RFW 500 million

Minimum market capitalization            New applicant: RFW 500 million

Net Assets                               RFW 1 billion

Track record                             3 financial years but less if issue is underwritten

Application Procedures                          A letter of application to list
                                                appropriate fees,
Disclosure document                             The disclosure document must be lodged
                                                 with CMAC

REQUIREMENTS                                       CRITERIA
1. Incorporation                                       Issuer must be duly incorporated under the
                                                        laws of Rwanda or any other recognized law.
                                                       A government borrowing authority.
                                                       A public authority ( e.g. local government)

2. Identity of persons                                   Names,
   responsible for                                        Address (residential)
   Information disclosed: Directors, Senior               Roles of each director and senior manager
Management, Advisers, Auditors, and Bankers.              Declarations by directors, sponsors
                                                          Consents by all professionals whose reports
                                                          have been used in the disclosure document.
3. Information on the issuers                            Incorporation
                                                         Information
                                                         Principal activities
4. Share Capital and Assets                              Authorized issued and fully paid up capital
                                                          of Rwf 500 million
                                                         Net assets of Rwf 1 (one) billion
5. Statistics on the Offer/Issue                         Amount of debt to be issued
                                                         Features of the bond
                                                         Purpose of the issue and intended application
                                                          of the proceeds
6. Track record and profitability                        Adequate track record, at least two financial
                                                          years of positive profits.
7. Transferability                                        Fully negotiable and freely transferable.
8. Minimum size of a bond issue                          Rwf 550 million
9. Disclosures in the Audited Annual reports and         3 years annual reports and accounts.
accounts and the Information Memorandum                  Internationally acceptable accounting
10. Status of the business                               Recent business trends, production, costs,
                                                          prices etc
11. Major shareholders and related party                 Names and amount of shares held by each
12. Working capital                                     sufficient
13. Loan subordination                                 Whether the loan is subordinated to other
                                                        debts of the issuer already contracted or to be
15. Convertible debt                                   Where the debt is convertible – information
                                                        concerning nature of shares offered, rate of
                                                        conversion and the rights of the bond holders
16. Taxation                                            Tax implication on income to the bondholders

         CMAC OTC Fees Schedule
ITEM                                 FEES RFW                   FEES USD

MEMBERSHIP:                          275,000 upon application   500
   STOCKBROCKERS                    320,000 upon admission     580
                                     160,000 Annually           290

      DEALERS                       275,000 upon application   500
                                     320,000 upon admission     580
                                     80,000 Annually            145

      SPONSORS                      275,000 Upon application   500
                                     320,000 upon admission     580
                                     160,000 Annually           290
COMMISSION:                          1.5%
   BONDS                            1%

    EQUITIES INITIAL FEE            Minimum 1,000,000 RFW  1,820
                                     Maximum 20,000,000 RFW 36,365
                                     Minimum Rwf 2,000,000      3,640
                                     Maximum Rwf 20,000,000     36,365
                                     Minimum Rwf 1,000,000      1,820
                                     Maximum Rwf 10,000,000     18,180
                                     Minimum Rwf 1,000,000      1,820
                                     Maximum Rwf 10,000,000     18,180

                                     Minimum Rwf 1,000,000      1,820
                                     Maximum Rwf 10,000,000     18,180
                                     Minimum Rwf 1,000,000      1,820
                                     Maximum Rwf 10,000,000     18,180


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