SECURITIES CLEARING AND SETTLEMENT ON GHANA STOCK EXCHANGE (A Study of an Emerging Stock Market)

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ABSTRACT
The purpose of this dissertation is to illustrate the securities clearing and settlement on Ghana Stock Exchange in the light of international standards set for these processes. The method used was to survey existing literature of clearing and settlement and emerging market countries and compare and contrast it with data concerning clearing and settlement processes on Ghana Stock Exchange.

The findings of the research were that Ghana Stock Exchange fulfils many of the existing international standards; however there are some major deficiencies. As the lack of studies concerning the topic has been addressed, the value of this dissertation was to identify main characteristics of clearing and settlement on Ghana Stock Exchange in order to evaluate and assess the processes.


TABLE OF CONTENTS

Research Proposal
Abstract
Table of Contents
List of Appendices
List of Figures
Glossary of Acronyms

1. Introduction
            1.1. Ghana
            1.2. Ghana Stock Exchange

2. Literature Review
            2.1. Empirical Literature
            2.1.1.   Securities Clearing and Settlement
            2.1.2.   Securities Clearing and Settlement in the EU
            2.1.3. Emerging Markets
            2.1.4. Emerging Stock Markets
            2.1.5.   Economic Reforms and Ghana Stock Exchange
            2.2. Conceptual literature
            2.2.1. Securities Clearing and Settlement on GSE
                        2.2.1.1.   Clearing and Settlement Processes
                        2.2.1.2. Settlement Risk
                        2.2.1.3. Legal Issues
                        2.2.1.4. Regulatory Oversight Issues
                        2.2.1.5.   Clearing and Settlement Institutions and their Participants
                        2.2.1.6. Safeguarding Issues
                        2.2.1.7. System Capacity

3. Methodology

4. Analysis and Findings
5. Conclusion and Recommendations
Reference List


1. Introduction


This dissertation is a report of a study of an emerging stock market in Ghana with the focus on securities clearing and settlement. The study was based primarily upon secondary research. This first chapter of the dissertation presents the background as well as aims, objectives, rationale and limitations of the study. Furthermore, the chapter concludes by giving background information on Ghana and Ghana Stock Exchange (GSE).


Today the global economy is shaped by an ideology which in international political economy is referred to as neoliberalism. In the 1980s, one of the main objectives became to promote free markets and decrease state intervention in many aspects of the economy, which was achieved through privatisation and deregulation of markets. (Balaam & Veseth, 2005, p.63) As a consequence the international financial order; rules, institutions and procedures developed for controlling international financial flows in industrialised countries were dismissed and the new order enabled the around clock and around the world free flow of private capital. Hence, the financial liberalisation laid the foundation for a more open economic, financial and political environment for cross-border securities trading. (Helleiner, 2005, p.169)


The financial markets and understandably the post-trade i.e. securities clearing and settlement industry benefited from the financial liberalisation; the industry has enjoyed significant increase in both turnover and the number of trades processed in the recent years. Technological innovations have also played a great role in the growth of financial markets in terms of the development of information technology and enabling the replacement of physical securities. Book-entry securities facilitated the securities clearing and settlement providers to expand their services in scale, scope and speed along with the development of computer systems. (Norman, 2008, p.5)



Apart from the developed the world, the financial liberalisation spread quickly also to the developing countries. The promotion of universalisation of the new world order was based on the grounds of global competitiveness and efficiency in order to achieve reduction in poverty and inequality. (Wade, 2005, p.292) This suggested that developing countries should turn their economies around, generally from state-domination to market domination. (Nwankwo & Richards, 2001, p. 165) Thus, neoliberal policies advocated the development of stock exchanges in the developing countries and for example contributed towards the establishment of GSE which was incorporated in 1989 and trading began in November 1990. (GSE, 2008c) The international policy suggested that national capital markets in developing countries would benefit from international capital inflows through purchases of stocks and bonds. Naturally this meant that the developing countries would expand their national capital markets and open them to international investors. (Maxfield, 2009, p.43) However, there is always the other side of the coin and the developing countries’ participation in the international economic system dominated by developed countries can be also seen as more harmful than beneficial depending on the point of view.


The role of emerging markets1 within the global economy is changing when considering such great economic powers like China and India today. Therefore emerging markets are an interesting subject to study. Ghana has been chosen for the reason that it has recently risen to the ranks of emerging markets as well as the fact that the GSE is a fascinating example of an exchange where the all-share index increased 64 percent last year (between January and October 2008) when all of the major stock exchange indices came down like never before (Kew & Bowers, 2008; Eskola, 2008).


This undergraduate dissertation will concentrate on studying securities clearing and settlement process on GSE from international perspective prior the implementation of central securities depository i.e. before March 2009 (National Australia Bank, 2009; GSE, 2008g). As there are different instruments traded on GSE, the focus was on equities. The aim was to objectively illustrate clearing and settlement process in the light of development of a fairly new industry to Ghana and find out if the process differs from the set international minimum standards. There is a lack of research concerning clearing and settlement and the objective of this study was to provide guidance of clearing and settlement practices for international banks that are considering offering Ghana as an investment alternative for their clients, as well as provide GSE an overview of the clearing and settlement process in order to evaluate the state of the current system and identify possible future course of action. Also...

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This is a General Thesis for both Undergraduate & Postgraduate Studies. The complete research material plus questionnaire and references can be obtained at an affordable price of N3,000 within Nigerian or its equivalent in other currencies.


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