Thursday, November 29, 2012

ASEA 2012 in Cairo

I leave tomorrow for the African Stock Exchange Association meeting 2012 in Cairo.
While I always agree with people when they tell me conferences are time consuming and can result in diminishing returns...(opportunity costs and all that)....I am excited for this meeting !!

The Agenda is posted on the ASEA 2012 website and the whole conference is VERY well organized and there are many interesting speakers that are NOT politicians. Sometimes this conference is about the politics but this one promises more. I am cautiously optimistic.

The theme of the conference this year is "Unleashing Africa's Investment potential-What could be done by African Capital Markets."

There may be security concerns but I believe the location of the conference will be safe and the staff at the stock exchange CASE appear to be on top of things. I plan to be conservative and remain close to the exceedingly posh-looking hotel.

Tuesday, November 20, 2012


I am very...

thankful for friends old and new.
full of thanks for learning so much by teaching.
grateful for my students who struggle, overcome, then give back.
cheerful 2012 is almost over.
hopeful for new beginnings in 2013...


Monday, November 19, 2012

SEC contemplating more scrutiny of order types on NYSE

After multiple problems with high frequency trading and Initial Public Offerings gone awry, matters discussed many times here on Muzungu, the Securities and Exchange Commission is exploring the idea that more extensive regulation & scrutiny is needed on the exchanges. According to a recent Wall Street Journal article, the SEC, run by Mary Shaperio (whose picture int he story clearly illustrates how difficult a tenure she has had at the helm of the the SEC), believes that high-frequency orders have received special treatment on the floor which is not really legal. All order must be treated the same. If some orders have more information or are given preference over other orders then the systems has broken down. The entire idea of an exchange is fairness of treatment. Otherwise, everything should be specially arranged like private agreements between buyer and sellers.

The entire purpose of an exchange is economies of scale and uniform treatment of orders. This is the way to a more sophisticated level of trading inside the building and not outside under the Buttonwood tree. How is it that the oversight regulator lost sight of this? How is it that Congress lost sight of this?

Regardless, regular investors must have the same opportunities on exchanges as the institutional or sophisticated investor. HA! That has never happened. The institutional trader has ALWAYS had an advantage on exchanges. It is the nature of the beast. They trade more and have contacts on the exchange floor. It is how it is. However, the exchange regulator must make sure that that advantage is not too great.
This is what is taking place right now.

While high-frequency traders (HFT) make up to 50% of the trading volume on exchanges, the question is did exchanges HELP them...either through commission or omission. I don't really know but if forced to speculate, the exchanges failed to stop the dominance of HFT's....hence no level playing field. Now enough people have complained so it is time to act.

We shall see what they come up with. I believe the SEC is fatigued. I do not think Mary Shapiro intended to be SEC Commissioner another term. She is done and worked hard. We shall see is new changes actually come to be.

Of course, my final thought is this, we (the WEST) do actually feel entitled to tell Africa how to regulate its exchanges. I still think this is ok. I believe that the NYSE faces challenges not currently faced by African Exchanges, and yet the small illiquid exchanges of sub-Saharan Africa so not need to follow in our exact footsteps and can leapfrog these particular difficulties.

I do hope things calm down so I can head to Egypt next week!              

Monday, November 12, 2012

Law and investment in Africa

I recently attended the Texas Africa Business Summit in Houston. It was very interesting and saw there some friends from Malawi. The Summit brought together many friends of Africa in the Houston Business Community. There is a huge amount of support of Africa, East Africa and investment in those relationships-business or otherwise. It was remarkable to me, coming from California which is not so far away, to see that support. Africa does not exist, really as far as California is concerned. I forgive them that since the last few years have been so difficulty here on the left coast. However, Hollywood has not stopped cranking out the American cultural propaganda they call movies and spend not so much time bringing the outside world to us...and they could do that. They have the power to do that.

Hollywood has sat by making money while California raises taxes to provide the basics like education. The State had to ask for more money to do what we already pay taxes now to have them do; which is to educate the children. Where is all of the money?? I am not that good at math but I think donating even a small percentage of some meaningless holiday films this season could solve the crisis of public schools in the entire State of California. So, people in California don't even care about California, let alone Africa. Houston, Texas has some people who care about Africa and I went to their conference.

There was not much discussion of the law at the Texas Africa business Summit. There was a good deal of discussion of how bad the colonial powers were in Africa and how we (those of European descent) should all be ashamed of that. There were also on discussion panels,many former diplomats who were now Academics or at least writing books about their time spent in Africa. To be honest, they said so many valuable and interesting things from their personal perspective of having lived and worked there for so many years. Also, of interest was the discussion by the mutual fund managers who spent time meeting with company executives learning how to invest in Africa. A wise South African told me when I was in Malawi this past Summer, that Africa is about relationships.

I am sure that is true, but it is also true about pretty much everything. I think he meant it in a more complex way. Africa is about cultivating those relationships. This is excellent advice for Americans who really think everything is about the transaction. The relationship is incidental or collateral to the deal. This basic truth and misunderstanding, is America's problem with the World and California's basic, fundamental problem-full stop. It is also the fundamental problem with a focus on laws when trying to promote investment on African Exchanges. Investing has ALWAYS, historically been about relationships. The law can help and support that but not create those relationships. Rule of law, banking infrastructure, phewy!! Get in there and start relating and that is how we create more investment.

This December I will attend the African Stock Exchange Association meeting in Cairo. It looks very stimulating and there might be some regulators there worth hearing from. Cairo may not be super friendly to female Americans but who knows. I go and invest my time because I believe that there is a future for investment in Africa, for America and the World. I go because each year these Exchange Executives meet and ask the questions that the Investment community asks as well. How do we improve the investment climate in Africa, above and below the Sahara??!!

Conferences are monumentally silly-some sillier than others, but they do start conversations. The bad things happen when that conversation stops.