Virtually connecting Africa and beyond, one country at a time.
November 30 marked the launch of Seychelles’ very own securities exchange, Trop-X, a concept that first began floating around in 2007 after the Seychellois government passed a securities bill to reform the local financial services sector.
According to reports, those initial plans were delayed by the global financial crisis. However, over the last four years, an organisation called Quote Africa Group has been working to create a virtually-connected pan-African group of exchanges, starting with what is unanimously being touted as their flagship product, Trop-X.
In brief, Trop-X is the licensed multi-asset, multi-currency securities exchange of the Seychelles, providing for and regulating the trading of equities, debt, derivatives, FX products and more. Trop-X was created to serve the local Seychelles and broader regional markets with an initial special focus on Africa.
“We are very excited about Trop-X and internally feel that this has the most potential of any of the Quote Africa Group companies,” says Bobby Brantley, operations and finance director of Trop-X and non-executive director of Quote Africa Group. “Trop-X will play an important role in the group as it is intended to capture and route the international investment flows into our group of exchanges. [The reaction has been] overwhelmingly positive. We are attracting significant interest from key African jurisdictions, Europe and North America and starting to field enquiries from key Asian markets like China.”
With all the buzz building around the idea of a pan-African exchange network – its purpose being to encourage more cross-border trade to flow – one question that constantly arises is why start with Seychelles?
Lying in the heart of the Indian Ocean, just East off the coast of Africa, Seychelles has drastically reformed itself over the last few years and is “strategically well placed between Africa and the producers of raw materials, and the consumers of raw materials in India and China,” explains Francois Venter, founding member and director of Quote Africa Group.
Seychelles has a Securities Act, Mutual Funds and Hedge Funds Act and supporting company, trust and foundations laws. The country also offers several tax exemptions and low tax structures, has no exchange controls and no restrictions on listing currencies allowing Trop-X to operate as a multi-asset, multi-currency exchange.
“The government, regulators and private sector professionals, such as lawyers and accountants that provide important support services around the exchange, are also very supportive of this new initiative seeing the value in what Trop-X can bring to Seychelles in terms of helping continue to grow the already rapidly growing financial services sector,” says Brantley. “The Government of Seychelles sees the potential for the financial services sector to become the number one pillar of the Seychelles economy and we hope to play a key role in contributing to this becoming a reality.”
Seychelles is also connected to Africa and the globe via underwater fiber optic cable connections, enabling them to access anybody, anywhere “in a matter of milliseconds.”
“What people don’t realise is there’s a lot of money pouring into the country,” says Venter. “With all that’s happening in Northern Africa, a lot of money is coming into the Seychelles; global investors will use Seychelles and Trop-X as an investment hub and release their money into the rest of Africa. Seychelles is very well located.”
Trop-X is just one part of Quote Africa Group’s overall vision – a pan-African group of exchanges.
“We have a monopolistic situation happening in Southern Africa right now; there’s only one major exchange, and they haven’t really catered to the needs of all other African countries, but we’ve come up with a unique set of listing requirements to suit the needs of African businesses and investors,” explains Venter.
“We’re close to finalising three to four deals with other African countries and exchanges and by the end of 2013 we may have six exchanges in other countries under the Quote Africa Group banner.”
Rather than going into these countries and downright taking over their exchanges, Quote Africa Group is engaging and going into partnership with these exchanges to enable them to retain their sovereign listings, but create additional liquidity through arbitrage and more cross-border flow. Quote Africa Group will be providing them with a pan-African set of rules and listing requirements, which are 90 per cent similar across all the jurisdictions.
“For the first time ever, you’ll have a cohesive set of rules across all the countries, all pan-African rules,” says Venter. “African countries are looking for a partnership model as opposed to a takeover model. We’ll take the Trop-X model and drop it in other countries.”
One of the biggest advantages to Trop-X model is its timing, says Venter. “We have a real advantage that we don’t have a legacy system and legacy environment. We could look and source the best systems and best practices from around the globe.”
Trop-X has been able to start fresh and with the latest technologies. Many developed markets are plagued with older infrastructure and the cost of switching to an electronic system is substantial. However, Seychelles has been able to start out with a state-of-the-art electronic system that will make it ready for the future as well as cost efficient.
Trop-X views itself as a 4th generation exchange, which they describe as being a multi-asset, multi-currency, multi-jurisdiction virtual exchange utilising common rules and listing requirements across the group exchange and the latest technology available for exchange, clearing and depository functions. Trop-X will offer multiple asset classes including forex, stocks, commodities, forwards, futures, options, CFDs and ETFs.
Ed Tuohy, managing director of AfriClear and AfriDep says the technology they were looking for was one that was very resilient and offering consistent performance.
“It’s not all about the speed,” says Tuohy. “Africa is a place where big gains can be made with efficiencies rather than building leading edge technologies. It’s better off to leverage off international experience and share that with Africa and bring it up to international standards. We’re bringing to market a solution that major banks in the UK, U.S. and Europe are already comfortable with and that is already accepted internationally.”
Tuohy says Trop-X will be going with a hosted solution from London, England as well as he anticipates 60 per cent of the daily flow will be coming from international sources.
“Cost of IT service in Africa is quite expensive, but we may deploy the technology in South Africa in the future due to regulatory reasons,” adds Tuohy. “It will enable us to come with a very robust and very cost-efficient offering. The type of end-to-end pricing we’re looking at is at least 50 per cent less than other exchanges in the region.”
Located on the first floor of Eden Plaza on Eden Island, Trop-X launched with three initial equities boards that allow for the listing and trading of shares of both domestic and foreign companies.
The Venture Capital (VCAP) Board is aimed at start-up companies, the Small and Medium Enterprises (SME) Board is aimed at companies with at least a year’s operating track record wishing to expand their operations whilst the Main Board is aimed at established companies looking to either raise additional funds or increase value to their shareholders. The Bonds and Derivatives Boards will be launched within the first half of 2013.
Quote Africa’s plans for the immediate future are to aggressively court fund managers, banks and financial institutions which are focused on Africa. The group plans to orchestrate several international road shows as well as attend industry conferences and seminars to spread the word about Trop-X in 2013.
Venter says one of their main goals is to connect Africa globally and the systems they’re integrating are world class.
He says: “Because of the strategic location of Trop-X, we can easily connect European and Asian investors to Africa and India; that’s our global expansion plan.
Trop-X could be a virtual exchange by 2015.”