Members
Trading members play a crucial role in the functioning of the exchange. Members are registered capital market service providers and their appointed representatives who are authorized to buy and sell securities on behalf of themselves or their clients within the exchange. Members play a vital role in maintaining the integrity and efficiency of the market. They provide essential services that facilitate the trading of securities, contribute to market liquidity, and ensure that the market operates in compliance with regulatory standards.
Some of the key roles and responsibilities of trading members include:
○ Order Execution: Trading members execute orders from investors, whether retail or institutional. They enter buy and sell orders to facilitate transactions in the market. They play a pivotal role in ensuring that trades are executed efficiently and at fair prices.
○ Providing Access: Trading members provide access to ESX’s trading platform for their clients, enabling them to directly trade in the market (direct market access – DMA). They offer trading platforms and infrastructure to facilitate market watch and trading.
○ Market Making: Trading members, known as market makers, facilitate liquidity in the market by continuously quoting bid and ask prices for specific securities. They help ensure that there are buyers and sellers for a particular security, making it easier for investors to trade.
○ Client Services: Trading members offer various services to their clients, such as research, investment advice, and portfolio management. These services are critical to the functioning of the Ethiopian capital market as investors rely on the ability of professional service providers to analyze macroeconomic, industry and firm level information, and compare the risks and rewards of their investment.
○ Compliance: Trading members must adhere to the rules and regulations set by ECMA and ESX. They are responsible for ensuring that their trading activities comply with all legal and regulatory requirements (such as KYC and AML).
○ Risk Management: Trading members are responsible for managing the risk associated with their trading activities. This includes monitoring positions, setting risk limits, and taking appropriate actions to mitigate potential losses.
○ Settlement: Trading members are responsible for ensuring the settlement of trades. They need to ensure that securities and funds are exchanged promptly and accurately to complete the transaction.
○ Reporting: Trading members are required to maintain records of their transactions and provide regular reports to clients, the exchange, and regulatory authorities as necessary.
○ Surveillance: Trading members may assist in market surveillance efforts to identify and report any unusual or suspicious trading activities to ESX and ECMA.
ESX provides the following categories of membership license.
○ Securities Broker
○ Securities Dealer
○ Securities Broker Dealer
○ Securities Broker (Investment Bank); and/or
○ Any other category as may be specified by ESX from time to time.
A trading member shall be appropriately licensed by the ECMA to enable its functions in any of the categories listed above and shall operate within the parameters and restrictions provided by ESX and such licensing or registration directives or requirements of the ECMA.
A trading member shall meet the minimum operating requirements and standards as prescribed by ESX from time to time on the following : personnel, organizational structure, governance, technology, infrastructure, policies, and processes; and competitiveness.