CMAC brochure.doc.doc.doc

476 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
476
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
1
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

CMAC brochure.doc.doc.doc

  1. 1. NATIONAL PUBLIC EDUCATION About the Rwanda OTC Market The Rwanda capital market now referred to as the Rwanda Over the Counter (OTC) market is a new development in the country. It was established by the Capital Market Advisory Council in the month of January 2008. What is a capital market? A capital market is a market where shares and bonds are bought and sold. Buyers and sellers of shares meet at the capital market to transact business. A capital market is sometimes referred to as a stock market or a securities market or a stock exchange. What is a bond? A bond is a debt. When you buy a Treasury Bond issued by Government you are a lender and the Government is a borrower. Equally, when you buy a bond issued by a company, the company is a borrower and you are a leader. The bonds will promise to pay you an interest income periodically. What is a share? A share is a unit of ownership in a company. When you buy a share in a company, you become one of the owners of the company to the extend of your shareholding. You participate in the affairs of the company through your voting rights at the General meetings. When the company reports profits and decides to distribute the profits, you are paid a dividend income. How does the capital market work? An organized capital market or stock market has three components. These are: One, the listed securities or stocks issued either by Government or companies; Two, the investors or the public who own the securities, and Three, the intermediaries or middlemen called stockbrokers. The stockbrokers are members of the OTC market who are authorized to sell and buy shares or bonds on behalf of the investing public. What is an OTC market? An OTC (Over the Counter) market is a securities market where transactions are negotiated between a buyer and a seller. OTC markets are usually small in size compared to established securities exchanges or stock markets. OTC markets also have 1
  2. 2. rules and regulations that are also less restrictive especially with regard to the issuing and listing requirements. In capital markets with both the OTC and fully fledged stock exchanges companies that may not meet all the listing requirements of the large and established stock exchanges prefer to list in the OTC market. Many established stock exchanges have grown from OTC facilities into large exchanges we see today. More OTC markets keep emerging as business needs demand. How does the Rwanda OTC market operate? The Rwanda OTC market operates a dual trading process. Firstly members trade securities directly with investors and among themselves. Secondly, open outcry trading sessions are conducted at the trading floor of the OTC market at the CMAC Secretariat every day from 9:00 a.m to 12:00 p.m. At the open outcry trading floor, members’ representatives get together and trade between each other. Are there any fees charged when trading? Whenever a stockbroker sells or buys shares or bonds on behalf of an investor they charge a fee called brokerage commission. How much commissions or fees do stockbrokers charge? The current brokerage fees are Bonds (debt): First Rwf 5m………………………………………... 1/8% Above Rwf 5m negotiablenegociable Shares (equities): First Rwf 100,000 ……………………………………1.5% Above Rwf 100,000………………………….. negotiable How can I buy securities (bonds or shares)? 1. Visit any one of the stockbrokers (members) of the OTC market 2. Open an investment account 3. Seek guidance from your stockbroker, your banker or investment advisor 4. Sign a purchase order or instruction to authorize the stockbroker to buy 5. Make payment or deposit funds into your investment account and get an acknowledgement from the stockbroker 6. Sign purchase transfer form to allow the securities to be transferred from you to the buyer. 7. Follow up the order after 24 hours. How to sell securities 2
  3. 3. 1. Visit any one of the stockbrokers (members) of the OTC market 2. Open an investment account 3. Seek guidance from your stockbroker, banker or investment advisor 4. Sign a sell order or instruction to authorize the stock broker to sell 5. Deposit the securities with the stockbroker 6. Sign a sell transfer form 7. Follow up the order after 24 hours Who is a Stock Broker A stockbroker is a professional who helps investors to either buy or sell securities (shares and bonds). The stockbroker therefore acts as the middleman or intermediary between investors who wish to buy shares/bonds and those investors who wish to sell securities. The stockbroker therefore eliminates the need for investors to search for trading partners. The stockbroker also gives advice to investors about which securities to buy and sell. Stockbrokers play a vital role in our market because all investment on the Rwanda OTC market can only be done through a stockbroker. To qualify as a broker, a person must among other things complete the an application form to be a member of ROTC, pay the required fees and get admission from the Capital Market Advisory Council after meeting the minimum education skills and professional qualifications What are the benefits of investing through the capital markets? Savings Investing in securities that are listed in the Capital or Stock market encourages investors to accumulate their savings in small amounts over time Income Investment in the stock market provides a source of income. Shares pay dividends when companies declared profits and decide to distribute part of the profits to shareholders. Bonds pay an interest income to the bondholders. Sometimes the income earned from listed securities is higher than interest earned from the money or banking sector. Wealth or Capital gain Whenever the prices of securities listed in the market go up, the value of the investment of the holders of those securities increases. This is called capital gain and is an important way of growing wealth through the stock market. It is important to note that a one –off investment in the Capital market does not make sense. It is therefore the accumulative investment over time that creates opportunities for growth in wealth through the Capital Market. Securities as Collateral 3
  4. 4. Listed securities are easily acceptable as collateral against loans from financial institutions. Liquidity Liquidity is the ability to convert shares or bonds into cash by selling within the shortest time possible without losing much value. When one needs funds urgently, listed securities could be very useful because they are more liquid than most other forms of assets. Bonds pay an interest income and shares pay dividends income • Grow wealth: Over time, the value of your investment increases, whenever the prices of your stock go up. This is called capital gains. • Listed securities are easily acceptable as collateral against loans. Equities market The Rwanda OTC market started with the Bond market. The equities market is now being activated with the listing of shares of public companies. Risks: There are no guarantees to returns on investments as prices of stocks or bonds will always rise and fall and sometime, investors could loose wealth in the capital market. It is therefore wise to seek advice before investing in stocks. Members of the Rwanda OTC Market The Capital Market Advisory Council has admitted 7 members to operate in the Rwanda OTC market. There are three categories of membership. These are Stockbrokers, Dealers and Sponsors. The stockbrokers buy and sell both in their own behalf and on behalf of the investing public. Dealers trade with their own funds. Sponsors provide advisory services to companies looking to raise Capital 4
  5. 5. MEMBERS OF RWANDA OTC MARKET FAIDA SECURITIES AFRICAN ALLIANCE CONTINENTAL RWANDA LTD RWANDA DISCOUNT HOUSE P.O Box 6679 C/o P.O BOX 6368 C/O P.O Box 6237, 5th Floor, TRUST LAW BUGINGO J BOSCO ECOBANK, Building, CHAMBERS KIGALI RWANDA Tel: 250 570735 Rue de l’ Akagera Fax: 250 570731 KIGALI RWANDA. KIGALI RWANDA DALLAS SECURITIES MBEA BROKERAGE KINGDOM BROKERAGE SECURITIES SECURITIES P.O BOX1028, P.O BOX 92, Avenue de RWANDA LTD Tel: 577071, la Paix, P.O BOX 6571 C/0 KIYOVU, KIGALI Tel : 250 574565 KAMANZI,NTAGANI RWANDA. KIGALI RWANDA RA &ASSOCIATES Tel: 250 574042 KIGALIRWANDA MBEA FINANCIAL DYER AND BLAIR SERVICES RWANDA RWANDA LIMITED SARL P.O Box 5292, Chadel P.O Box 92, Avenue de Building, Avenue de la Paix 1235, de la Milles Collinnes, Tel : 250 574565 Tel : 250 570390 KIGALI RWANDA KIGALI RWANDA 5

×