Nairobi — In the absence of a national identification system, the Uganda Securities Exchange says it will use local and foreign investors' fingerprints taken at the time of opening an account at the Securities Central Depository agents.

According to USE, this will guard against fraudsters especially now that the bourse is about to switch to an automated trading system.

"All shares to be traded at the USE will have to be deposited into the Depository and no investor will be allowed to operate two accounts on the Securities Central Depository System," said USE chief executive Simon Rutega.

USE will be commissioning the licensed agents to hook the investing public into the Securities Central Depository system.

These agents will include the brokers/dealers and custodians.

Mr Rutega said the Securities Central Depository will accept deposit of securities certificates through the participants (brokers/dealers).

"Each investor owns a securities account through which shares are registered. Settlements will be done on behalf of the investor by the participants," he said.

The Securities Central Depository System, which acts like a bank of shares, and hence holds shares of investors in a central and integrated manner is expected to improve the efficiency of the Uganda Securities Exchange when it commences trading using electronic trading system soon.

The USE is following in the footsteps of the Nairobi Stock Exchange and the Dar es Salaam bourse which are already using both automated and electronic trading systems.

While both the electronic and an automated trading have brought significant benefits to the investors through use of the Internet, they have hidden dangers for the unwary.

The current situation across the East African region shows that investors are not as informed as they should be on how the securities markets work, and the risks and rewards of investing.

For example, there have been cases of fraud in the automated trading system involving brokerage firms at the Nairobi Stock Exchange.

With the envisaged application of computer technology, Mr Rutega says Uganda Securities Exchange anticipates increased trading volume and crosslisting on its stock exchange besides benefits such as ease and speed of transfer of shares leading to improved/enhanced efficiency, reduced risk of loss, theft, mutilation of certificates and reduced paper work hence low administration costs.

At the moment there are 10 products listed on Uganda Securities Exchange.

The locally listed products are: British American Tobacco Uganda, Bank of Baroda of Uganda, Development Finance of Uganda, New Vision Ltd, Uganda Clays Ltd and Stanbic Bank Uganda Ltd.

The cross-listed products, which are mainly from Kenya, are: East African Breweries Ltd, Equity Bank Ltd, Kenya Commercial Bank and Kenya Airways.

Uganda Securities has a market capitalisation of Ush7.5 billion ($3.75 million).

In terms of fixed income instruments the Uganda Securities Exchange currently have 27 government bonds listed while there are five corporate bonds -- the East African Development, Standard Chartered Bank, Housing Finance Bank, Stanbic Bank Uganda Ltd and the PTA bond.

Over the past three years, the East African Capital Market Authorities and the East African Securities Exchange Association have been working to integrate the stock markets in the region.

It is projected that East Africa will have a common stock market before 2012 to capture larger market and as well as increase investment in the region.