Introduction

A stock exchange refers to an organized and regulated financial market where securities (bonds,
notes, shares) are bought and sold at prices governed by the forces of demand and supply. A
stock exchange does not own shares. Instead, it acts as a market where stock buyers connect with
stock sellers. Stocks can be traded on one or more of several possible exchanges such as the
Uganda Securities Exchange (USE). Although you will most likely trade stocks through a
broker, it is important to understand the relationship between exchanges and companies, and the
ways in which the requirements of different exchanges protect investors.

Stock Exchange in Uganda

The Uganda Securities Exchange (USE) was established in 1997 as a company limited by
guarantee, and was licensed in 1998 by the Capital Markets Authority to operate as an approved
securities exchange.

The Exchange is a central place for trading of securities by licensed brokers/dealers. It provides a
credible platform for raising of capital; through the issuance of appropriate debt, equity and other
instruments to the investing public. In this way, the Exchange provides essential facilities for the
private sector and government to raise money for business expansion and enables the public to
own shares in companies listed on the Exchange.

In 2017, the Exchange demutualised and became a public company limited by shares. The
Exchange is governed by a Board of Directors that includes representatives of listed entities,
representatives of brokerage firms as well as independent non executive directors. The Exchange
also has a securities central depository that is responsible for settlement of all trades as well as
custody of securities. It also provides registry services to companies. There are plans underway
to self list the Exchange in the next few years and open up its ownership to other interested
parties and investors.

How Uganda Securities Exchange (USE) works

The Exchange has three segments which can be utilized by investors to raise capital: EQUITIES

Growth Enterprise Market Segment (GEMS) which aims at small and medium sized enterprises.

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Main Investment Market Segment (MIMS) is main market segment and attracts stringent
eligibility, listing and disclosure requirements.

Fixed Income Securities Market Segment which provides a separate market for government
bonds, corporate bonds, commercial paper, preference shares, debenture stocks and any other
fixed income instruments.

Listing procedures and requirements at Uganda Securities Exchange (USE)

A Company intending to apply for a listing on the Uganda Securities Exchange must conform to
the listing Rules and Regulations as stipulated in the Continuing Listing Obligations. These
obligations require that for the company to be admitted to the Official List, the following
information shall be disclosed in an information memorandum or prospectus for an application
for securities being listed on the Exchange;

Letter of no objection from the industry regulator of the issuer (if the company operates in a
regulated industry); Board of directors’ resolution to list; Shareholders resolutions in respect of
the offer; Capital Markets Authority approval letter; Contracts entered into in connection with
the Issue; Underwriting agreements if any; Contracts with registrars where applicable; Certificate
of incorporation of the issuer or any other incorporation document; Declaration by the
sponsoring broker in the form set out in Appendix 6 of the USE Listing Rules; Memorandum and
Articles of Association of the Issuer or any other constitutive documents which must comply
with the requirements of the Securities Exchange whether or not required by the law; Copies of
the documents provided for inspection pursuant to the proposed issue; Financial reports for the
three to five year period preceding the issue; A list of existing shareholders; Management
contracts if applicable; Letter of undertaking of the issuer; Material contracts; A Reporting
Accountant’s report. For the avoidance of doubt, the reporting accountants report shall be
prepared by a firm different from the one carrying out the audit of the issuer.

For an applicant that is already listed on another and is applying to list by way of introduction, a
letter of no objection must be submitted from the regulator and stock exchange of the primary
market where the applicant’s securities are listed.

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Listed companies on the Uganda Securities Exchange (USE)

Currently (2019), there are 16 (Sixteen) companies listed on the USE. These are Uganda Clays
Ltd, Bank of Baroda (U) Ltd, British American Tobacco Ltd, DFCU Ltd, The New Vision
Printing and Publishing Co-Ltd, Stanbic Bank Uganda Ltd, National Insurance Corporation, East
African Breweries Ltd, Kenya Airways Ltd, Jubilee Holdings Ltd, Kenya Commercial Bank Ltd,
Nation Media Group, Centum Investment Ltd, Equity Bank Ltd ,Uchumi Supermarkets and
Umeme Ltd.

How does trading take place at Uganda Securities Exchange (USE)

As an investor wishing to buy shares through the USE, you must approach your stock broker and
express your desire to buy shares of a given listed company.

Your Stock broker will provide you with details of the trust account specifically opened by the
stock brokers to keep investor’s money intended for USE transactions

You will then deposit the money of any amount into the trust account. It is a requirement of the
USE that for local orders, payment is made upfront by the investor.

Your stock broker will then post the order (bid) on the Automated Trading System (ATS) during
trading hours.

When the bid matches an offer (an order to sell) by either the same stock broker or other stock
brokers, then the transaction is considered to have been concluded.

Your Stock broker will then credit the shares to your SCD account

The role Uganda Securities Exchange (USE) plays in an economy

Stock exchanges have multiple roles in the economy, these include; mobilizing savings for
investment, raising capital for business, facilitating company growth, corporate governance,
profit sharing, creating investment opportunities for all investors, raising government capital for
development of projects, barometer of the economy.

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References:

Listed companies on the Uganda Securities Exchange, www.use.org.co.(2011)

Lutamaguzi, J. (2010), “The listing Requirements of the Uganda Securities Exchange,”

Security Central Depository, USE , Kampala, Ugandan.

Mbabazi J (2003) Listing requirements and capital development in Uganda,” The official

journal of the capital markets Authority, Vol 1, No 2, January/March issue.