How to start investing on the Ethiopian Securities Exchange

You cannot buy listed shares directly from the exchange yourself. Trading on the Ethiopian Securities Exchange is done by licensed trading members on behalf of clients. Your first step, therefore, is opening an account with one.

Step 1: Choose a licensed intermediary

Check that the firm holds a current licence from the Ethiopian Capital Market Authority and is admitted as an ESX trading member. Both are matters of public record. A firm that cannot evidence its licence should not be handling your money.

Step 2: Open and verify your account

You will complete an application and provide documents so the firm can meet its know-your-customer obligations: government photo identification, proof of address, a recent photograph and your tax identification number. Institutions provide incorporation documents, a board resolution and identification for authorised signatories and beneficial owners.

This verification is a legal requirement, not an obstacle. It is part of what makes a regulated market safer than an unregulated one.

Step 3: Understand what you will pay

Before you trade, ask for the schedule of charges in writing. You should know the commission rate, and the exchange, regulatory and depository fees that apply. Costs compound against you over time, and a firm that is vague about them at the outset will not become clearer later.

Step 4: Fund the account and place an order

Once verified, you fund your settlement account and can instruct your dealer. Decide before you call whether you are placing a limit order, where you set the worst price you will accept, or a market order, which executes against whatever is available. In a market with limited depth, a limit order protects you from an unpleasant surprise.

Step 5: Check your contract note

After execution you receive a contract note stating the security, quantity, price, commission and settlement date. Read it. Confirm it matches what you instructed. Keep it.

Step 6: Settlement

The trade settles through the Central Securities Depository within the exchange's settlement cycle. The securities are recorded in your own account at the depository. They are your property, held in your name, not pooled into the firm's assets.

Before you begin

Decide how much you can genuinely afford to invest, and assume you will not be able to access it quickly at a price you like. Spread your investments rather than concentrating in one company. And if you do not understand what you are being sold, do not buy it until you do.