 General information |
 What is a Stock Exchange? |
A Stock Exchange is a market where large and small investors can buy and sell securities (shares, bonds etc). It is an organised market where buyers and sellers of securities meet as they are reprented by dealers/brokers and acquire or dispose securities. It is a market in which securities are traded by members of the Exchange who may act as both Agents (Brokers) and as Principals (Dealers).
The DSE is one such market which has recently been set up Tanzania. It was established in 1996 as a result of the Government policy of transforming the economy of the country from a public sector bias.
The Exchange was incorporated in 1996 as a company limited by guarantee without a share capital. It became operational in April 1998. The DSE is therefore a non-profit making body created to facilitate the Government implementation of the reforms and in the future to encourage wider share ownership of privatised and all the companies in Tanzania. The DSE is currently located at the fourth floor, Twiga Building, Samora Machel Avenue, Dar es Salaam. The Exchange is open for 5 days in a week, Tuesday, Wednesdays and Thursdays. Trading hours take place between 10-11 a.m.
The securities currently being traded are Ordinary Shares of three companies and one corporate Bond. The three companies whose shares are traded at the DSE are TOL LTD, Tanzania Tea Packers Ltd. and Tanzania Breweries Ltd. The East African Development Bank (EADB) has listed a Bond. More companies are due for listing later this year. The DSE membership consists of licensed Dealing Members (LDMs) and associate Members. LDMs are allowed access to the trading floor. Associate members are institutions and companies, which support the DSE.
| Organisation of the DSE |
| Structure |
The DSE is governed by a Governing Council, which consists of 10 members drawn from various interested groups in the society.
Three Licensed Dealing Members
Two Associate members representing listed companies
One Associate member representing Institutional investors
Two associate members representing professions
One associate member representing the public
The chief Executive Officer who is an ex-officio member
| Official Trading Hours |
Trading takes place three times in the week on Tuesdays, Wednesdays and Thursdays starting from 10.00 am to 12.00 noon. The number of trading days will be reviewed in the future with increased activities (i.e.order flows).
| Trading Systems |
Trading in conducted at the DSE Trading Floor under a continuous open outcry auction trading system. The representatives of the licensed Dealing Members (LDMs) converge at the Trading Floor and trade by shouting their orders to the board writer who records the order on the board. Trading is commenced an ended by the ringing of a bell.
| Public Gallery |
A public gallery is at the back of the trading floor from where members of the public can view and listen to trading as it takes place through a glass wall that separates the public gallery and Trading Floor. Proceeding on the Trading Floor is relayed to the gallery by a public address system.
| Roles of the DSE |
The DSE is a central place where the exchange of shares or bonds takes place. It is a secondary market where existing shares and bonds, (i.e. securities already issued in the primary market) are being sold and bought. The existence of the DSE offers an opportunity for successful issue of shares to the public through Initial Public Offerings (IPOs). For the avoidance of doubt, no company issues shares through the DSE directly. The shares are issued to the public in the first instance and thereafter traded at the DSE.
| The DSE plays the following roles |
It provides a market place for shares already issued to change hands- this is the physical location where dealing takes place, the Trading Floor.
It creates liquidity; this is the ability of securities to be converted into cash at a market price. It is the relative ease with investors can get in/out of a position, by buying and selling shares.
It provides a mechanism for price discovery- the price is determined when offers and bids match on the trading board. Brokers will collect orders for purchase and selling of shares and post them on the trading board. When the quotations of a bid and an offer matches, the transaction price of the shares is determined and the shares in question are considered to have been sold. The price at which these shares are sold indicates the value of the shares in question and indeed the value of a company when the shares are considered in their totality.
It allows for transparency- all operations are carried out openly.
Price sensitive information on any listed security must be disclosed to the public. All companies listed on the DSE are required by law to disclose all information to the public to allow current and potential investors to assess the company and make informed decisions on whether they should buy or sell.
It facilitate the privatization of parastatals, which are being restructured by the Government through the President Parastatal Sector Reform Commossion (PSRC).
It assists indigenous people in attaining a stake in the privatized companies.
It assists companies in need of funds to raise capital for their developments.
It facilitates savings in the society to be used for investing in shares of the companies.
The Stock Exchange is also a mirror for the performance of the economy.
It assists the Government to raise money through issuance of Government Bonds.
It also assists the Government to raise money by way of selling its holdings in the privatized
companies.
| Functions of the DSE |
To bring companies and investors together so that
- investors can invest capital onto companies;
- companies can use the capital they raise to invest in projects (expansion, modernizationetc).
To provide investors with a means of selling their investments should they wish to do so, by ofering a ready market in the buying and selling of securities
To assist shareholders in realising some of the value of their shares in cash when they decide to sell a portion of their holdings.
To facilitate share-offer tenders in case of take-overs.
| Procedures |
Dealings in the DSE are regulated by the Capital Markets and Securities Act of 1994 and the Rules made by the DSE Council. The Act stipulates the following:
| Listing Procedure |
All companies wishing to be listed at the DSE must be approved by the Capital Markets and Securities Authority (CMSA) and the DSE Council.
A sponsoring broker has to be appointed to process an application through the DSE and CMSA. The duties of a sponsoring broker will include;
To coordinate contacts between DSE and the listed company
To ensure that the company complies with the listing conditions.
Documents required before listing include:
Auditor's Report;
Sponsor's Report;
Prospectus;
Audited Accounts for the last 3 years;
Memorandum and Articles of Association;
Share distribution, etc.
| Trading Rules |
As earlier indicated, trading takes place three times a week; on Tuesdays, wednesdays and Thursdays between 10-11 a.m.
The trading is conducted on continuous open out-cry auction.
For the trading to take place, at least two Authorised Dealer's Representatives (ADRs) must be present on the Trading Floor.
A set of comprehensive trading rules that governs trading operations exists. These rules ensure fair play among market operators and custody of investors funds. They also ensure fair and efficient market operations.
| Buying Shares |
An individual wishing to buy shares at DSE must approach any of the Licensed Dealing Members (LDM) and express his/her desire to buy shares of a given listed company.
This individual must give the money equivalent of the number of shares he is willing to buy to the stockbroker/dealer.
The Dealer/Broker will deposit the money so received in a trust A/C, an account specifically opened by all brokers to keep clients money intended for DSE transactions.
The selected dealer will post the order (bid) on the trading board on the following trading day.
When the bid matches on offer (an order to sell) by either the same broker or other brokers, then the transaction is considered to have been concluded. |
| Selling Shares |
An individual wishing to sell his/her shares will have to follow the following procedures ;
Contact any of the LDMs indicating his/her desire to sell the shares of a listed company.
The individual will have to surrender his /her share certificate to the LDM and include the process of opening up an account at the Ceneral Depository System (CDS) of the DSE
The LDMwill have to verify the validity of the certificate with the Issuer, one of the listed companies and deposit the shares/bonds in CDS.
The LDM, having opened a CDS account for a client and deposited the shares therein, verified the certificate, will then come to the DSE Trading Floor and post the offer on the board.
When the offer equals a bid price quotation, the transaction is considered to have been concluded, and the shares will have been sold.
| Type of orders |
A client may instruct a broker to process several types of orders. An order may be :
A Limit order- this is an order, which has a specified price when it is posted for execution
A Market order- this is an order, which does not have a specific price when posted for excution.
This is type of an order must be executed promptly at the best price obtainable and will have priority over limit order traders through a range of price levels and assumes an initial price limit value normaly based on the price most advantageous in the market.
A market order trades through a range of prices starting at the best price in the market.
| Collection of Cash from Sale |
A transaction for share sales is settled in 5 working days.
This is the delivery and settlement system, and it is based on the DVP (Delivery vs Payment ) of 5 business days.
For Bonds, the settlement takes place in DVP of T+3. This is because brokers may have opened Trust A/Cs in two different banks and the banking system requires at least 5 days for the money to be cleared into the selling brokers account.
Therefore, a shareholder selling his/her shares on Monday will be getting his cash by Friday of that week.
NB: The clearence and settlement of cash for upcountry transactions may take longer than 5 days as the cheques must be cleared across regions.
| Central Depository System |
The DSE has installed a computerized Central Depository System (CDS) to replace manually processed transactions.
The CDS was commisioned in June, 1999. Before any Security is traded, it must be deposited with the CDS where CDS accounts are opened for every investor.
CDS will enhance efficiency and transparency of securities dealings.
| Commission rates |
| Bonds |
| Transaction size |
Application commission |
| UP to Tshs. 40m |
1/16% |
| On any additional |
1/32% |
Amount exceeding Tshs. 40m
Minimum commission
|
Tshs. 5,000 |
| Fidelity Fund |
In a accordance with the Capital Markets And Securities Act, 1994, the DSE has established a Fidelity Fund Account.
This is provided for the protection of investors who suffer pecuniary loss as a result of the failure by an LDM or staff to handle money or other property entrusted to the LDM.
The compensation is currently limited to Tshs. 100,000/=.
| List of dealers/ brokers for the DSE |
| Tazania Securities Limited |
Contact: Mr. Leanderi L; Tairo-Uras
TDFL Building,1st Office Block,
P.O.Box 9821
Dar es Salaam
Tanzania
Tel: (255-022) 2112807
Fax (255-022) 2112809
E-mail: tsl@muchs.ac.tz
| Rasilimali Limited |
Contact: Mr. Gabinus Maganga
Mr. Arphaxad Masambu
NBC Investment House
Samora Avenue
P.O.Box 9373
Dar es Salaam
Tanzania
Tel: (255-022) 2111708/13
Fax: (255-022) 2113438
| Solomon & Co. Limited |
Contact: Mr. Jeremiah Solomon
Extelcoms House
Samora Avenue
P.O.Box 75777
Dar es Salaam
Tanzania
Tel: (255-022) 2112874/2131713/2124495
Fax: (255-022) 2131969
| Orbit securities Co. Limited |
Contact: Mr. Laurian R. Malauri
Mr. Gratian Kamugisha
Twiga House
Samora Avenue
P.O.Box 31831
Dar es salaam
Tanzania
Tel: (255-022) 2111758
Fax: (255-022) 2113067
E-mail: orbit-sec@raha.com
| Vertex International Securities Ltd. |
Contact: Mr. Nazir Karamagi
Annex Building- Zambia High Commission,
Sokoine Drive/Ohio Street
P.O.Box 13412
Dar es Salaam
Tanzania
Tel: (255-022) 2110392/2116382
Fax: 9255-022) 2110387
Email: vertex@intafrica.com
| Core Securities Ltd. |
Contact: Mr. George Fumbuka
Mr. Charles Bupamba
Twiga House
Samora Avenue
P.O.Box 76800
Dar es Salaam
Tanzania
Tel: (255-022).2123103/2125147
Fax: (255-022)2182521/2122562
Email: core@twiga.com
| Common Terminologies in stock markets |
Listed company means a company whose securities are listed at the DSE.
Listed Security means a security which has been admited to a listing at the DSE.
Dealer or StockbrokingFirm means a limited company constituted for the purpose of undertaking on his behalf as well as on behalf of clients all transactions for which he is resposible in the course of exercising his functions as a strockbroker.
all or nothing means that the bidder or offeror is only interested in either buying or selling the total number of shares displayed on the Trading Board and does not wish the order to be reduced in size.
Bid is an order to buy a security posted on Trading Board.
Books close date means the day on which the register of a company is closed.
Buyers'Market is a market which in an initial calls in a particular security the aggregate nominal amount of bids exceeds the agregate nominal amount of offers.
Cum placed immediately before a distribution or benefit implies inclusion of the distribution or benefit.
Coupon means the amount of interest, which a bond pays, on its nominal value.
Dividend means the proportion of profits, which is paid out to shareholders in a company, offten paid in two installements as interim and final dividend.
Dividend cover means the number of times a copany could pay its annual dividend from its earnings
Ex similarly means that the bargain was dealt exclusive of distribution or benefit.
Match is where two calls, one bid and offer have been either wholly or partially satisfied and declared as trades in accordance with the matching Procedures contained in the DSE Rules.
Offer means an order to sell a security posted on the Trading Board.
PE ratio means Price-Earnings ratio, a relative measure of how cheap or dear a company.
Price means the unit prices of a security.
Profit and Loss Account means a statement indicating the results of the operations gate nominal amount of offers exceeds the aggregate nominal amount of bids.
Spread means the step by step increase in price by which bids and offers may be raised or lowered.
Trading Board means the facility/computer screen provided for matching offers and bids on the market. |
