Over the-counter trading although a popular notion amongst traders has recently seen its first fruits within Namibia (in a formalised context) with Agra getting on board with the new service.
Speaking to the Economist, the Chief Executive Officer of Namibia Stock Exchange, Mr Tiaan Bazuin, helps explain the process. "When it comes to a company listing, there are various requirements set up by the stock exchange that a company must comply with. The process of conversion is often long and tenuous for several companies. What the Namibian stock exchange has done is create a separate market for such companies which may be in the process of meeting all of the listing requirements. In a formalised way, Over The Counter (OTC)market is available for such companies. This trading works on the basis that the usual regulatory oversight is somewhat relaxed as compared to those of listed public companies. Agra serves as the first company to utilise this new service offered by Namibia Stock Exchange (NSX). New in the sense that it is a formalized way of over-the counter trading."
Mr Bazuin noted that this form of trading is not one without risk yet its benefits are still substantial. "This method is riskier as there is less regulation but it as still not as risky as someone making direct share purchases to a private company where there is no oversight. The OTC market provides a benchmark for a company to be open to more investment but its main aim is price discovery. This means, shareholders have the advantage of having an indication of the value of share prices at a given time and hopefully make their own judgement calls based on that. It is my hope that more companies will take advantage of this form of trading as I believe it serves as a stepping stone for companies to discover new prospects of investments and raising capital especially if they are on route of being listed public companies."
Mr Bazuin then stated that there are still certain requirements that a company has to adhere to before taking on the OTC trading. "We require a specific accounting system from the company, a level of disclosure when corporate events take place and lastly a security dealer to facilitate the transaction. This is to ensure a level of transparency and certification that the trade will take place as per the requirements."
When asked about the possible impact of Agra's utilisation of the alternative market with respect to the Index performance Mr Bazuin interjected explaining that factors affecting trade on the stock exchange are too vast and narrowing down to a specific reason is pure speculation. "Its just what markets do! Stock exchange cannot provide an answer to why the overall index was high in mid January or the last week of the same month. With the stock exchange there are just as various factors that constitute an overall index value. Stock brokers generally do the speculation but they too can either be wrong or right. Its simply hard to say what spearheaded the high values."
Mr Bazuin then gave an indication of other NSX projects in the pipeline. "As a company there are several projects which we are working on but they have to be geared towards what the public wants. As an example we are working on offering Exchange Traded Funds (ETFs). This will be a combined basket of shares for a potential investor. It will provide to some degree a balanced portfolio from which a share holder will have an indication how a sector is fairing. Again this depends on whether demand for such a product line is actually available in the market."