The capital markets, just like other economic sectors have their specialists firms and individuals that specialize in organizing and implementing primary market issuances and facilitate the secondary market trade of securities. Some of the key specialists operating on capital markets are referred to as intermediaries. They are parties that facilitate transactions between issuers and investors on primary markets and between issuers and investors on secondary markets.
A stock exchange is a specialized market place where demand and supply for securities can meet easily to transact. In Tanzania, stock exchanges are authorized by CMSA. In order to be authorized, stock exchanges must have at least three licensed members (brokers/dealers). Currently, in Tanzania, there is only one stock exchange - the Dar es Salaam Stock Exchange (DSE); which was established 1996 and became operational in April 1998. The right to trade on a stock exchange is limited solely to members of that specific stock exchange. Such members (dealers and brokers) are referred to as Licensed Dealing Members (LDMs) of the exchange. DSE dealer and broker membership requirements are:-
Worldwide, stock exchanges are "business clubs" that are Self-Regulated Organizations (SRO). An SRO is an institution which sets its own rules to govern the conduct of its members, who are required to comply with these rules. DSE has various members, including Licensed Dealing Members (brokers and dealers who conduct trade), institutional investors, listed companies, academic institutions, fund managers/investment advisors and professional bodies. These members appoint among themselves parties to sit on the DSE Council, the governing body of the exchange. CMSA, the market regulator, was vested with the power to appoint one person to represent public interest on the Council. The term for DSE Council membership is three years and members can serve for a maximum of two consecutive terms. The council appoints the top management of the exchange as well as setting up different rules to be observed by its members and by different users of services that are offered by DSE such as listing rules, trading rules, clearing and settlement rules, etc. Rules that are set by the DSE Council are binding on all members, thus DSE being an SRO.
An important group of capital markets intermediaries are brokers (also called stockbrokers). Brokers play roles on both primary and secondary capital markets. On the primary market they perform the following:-
Brokers' roles to the secondary markets include the following functions:-o Acting as agents, they buy and sell securities on behalf of their clients at a commission.o Advisory services with or without a fee is a continuous service provided by all brokers on the market. Investors in securities, often, develop close relationships with their brokers.
These are entities which provide financial advisory services, for a fee, to investors in various ways; as well as advising issuers wishing to go public and/or obtain listing at DSE. They also organize for placements of bonds, arrange for the underwriting of public offers and perform any other financial advisory service as required by the financial sector in general and capital markets in particular. Requirements to obtain a license are similar to that of brokers and dealers with two key exceptions:
Companies intending to issue/offer securities to the public must appoint a team of professionals to assist them in different capacities. They are basically responsible to lead the company through the issuance process and are referred to as issuance advisors which include the Lead Advisor, Sponsoring Broker, Reporting Accountant, Legal Advisor, Main Receiving Bank and Collecting Agents. In more specific terms they perform the following functions:-