GSE Introduces T-3 Clearing and Settlement System

The Ghana Stock Exchange (GSE) has effected experimental changes in the settlement cycle of trading on the floor of the Exchange effect from February 3, this year.

Mr Samuel K. Peprah, an official of the GSE told the Ghana News Agency (GNA) Business Desk that the experiment ends at the close of business on February 28,2003.

During this period, trades executed on trading day will now be settled earlier on three business days after the transaction instead of the previous five days.

He said at the end of the month, "the GSE would review the performance of the system after which we will present a report to the Council of the Exchange and the Securities Exchange Commission.

"After this we hope to get the green light from them and then we can go in for T+3 settlement and clearing full scale."

When pressed further on when the T+3 system would actually take off, Mr Peprah said, "give or take, we are looking at about one month", adding that it depended on how fast things go.

He said currently a broker would pay for shares bought for a customer or deliver shares sold and receive payment from the buyer's broker on the third full business day following the date of the transaction instead of the previous waiting period of five business days.

A statement from the Exchange noted that it was expected that the new arrangement of settling trades on three business days after transaction would "move our market forward to conform to the internationally accepted standard practice of settlement as per the G30 recommendations, which seeks to improve efficiency and liquidity on stock Exchanges".

Mr Peprah said previously it took 14 days, something that did not put us in a poll position in the sub-region.

"Ideally one should have payment almost instantaneously as per security trading."

Mr Peprah said the introduction of the T+3 settlement procedure was a big step towards conforming to international standards, which he said were being watched by "foreign investors who monitor our markets every time for positive trends that will bring them quick and efficient returns on their investment".

The GSE is listed second in terms of capitalisation in the sub-region after Nigeria which already operates the T+3 settlements and clearing system and has over 300 listed equities.

He said the changes would bring a positive impact on trading on the Exchange as it would improve liquidity and make more funds available to both buyers and sellers of equity.