Tuesday, October 9, 2012

GSE defends pre-trading

Ghana’s Stock Exchange (GSE) pre-trading operations on the bourse are in line with global stock exchange standards and are not an illegality, Mrs. Elizabeth Mate-Kole, General Manager, Operations at the GSE has asserted. “Pre-trading is a normal practice among many nations, does not distort share prices on the exchange and is not an illegality, contrary to some views held by some sections of the public. “The daily pre-opening period for trading is to allow the previous day’s surplus to be put on the stock to be traded,” Mrs. Mate-Kole explained to B&FT in Accra, reacting to a statement made by Mr. Kwabena Antwi-Situ, a Senior Audit and Advisory Manager of Deloitte Ghana (DG). Mr. Antwi-Situ said the GSE’s pre-trading operations do not conform to global stock exchange trading standards and have the tendency to distort share prices. “It is not done anywhere as far as I know. There’s no pre-trading time before the official trading on the bourse at any of the active trading platforms in the global financial industry. “It is something they should just do away with because we are growing, and we need to emulate international best practices.” Mr. Situ was of the opinion that the pre-trading exercise has the tendency to distort prices on the bourse since, according to him, the price a company closes its trading activity on the previous day is different from what it begins its operations with the following day. Mr. Situ explained that the price changes have the potential to mislead an investor, and that the pre-trading needs to be discontinued since it is not done anywhere on any active trading platform of the global financial industry. “The practice is not just alien to the global stock-trading industry, it also distorts share prices. “At the end of the day your closing price should be the same as your opening price (on the next day). But because of the trading that goes on before the official trade, you find some of the companies having their closing prices (of the previous day) not the same as their opening prices (at the start of official trading the present day). “This practice distorts the price you knew as at yesterday, based on which you would have made a decision,” he said. While the official time of opening of the GSE for trading is 10:00 am, the bourse runs a daily pre-open trading session from 9:30 am till the official opening -- a practice that it says affords dealers increased contact hours with their clients during the trading day and boosts liquidity. It is also meant, according to the GSE, to afford non-resident investors in time-zones different from Ghana a greater opportunity to do business with their local brokers. Mr. Ekow Afedzie, Deputy Managing Director of GSE, explained that activities of the bourse are overseen by the Council as well as approved by the Security and Exchange Commission. “Journalists need to focus their reportage on how to generate activity on the stock exchange and how to encourage more companies to enlist on the bourse,” he remarked.

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