Ethiopia Capital Market Authority Tightens Exchange Oversight











ECMA Mandates Independent Oversight for Exchanges, Details Strict New Supervision and Reporting Framework

ADDIS ABABA — The Ethiopian Capital Market Authority (ECMA) has released a comprehensive new supervision guideline, establishing a rigorous framework for oversight, compliance, and governance for all market participants. Dated October 2025, the directive introduces significant new requirements aimed at bolstering market integrity and protecting investors.

Key measures include mandating the creation of highly independent committees to oversee the regulatory functions of exchanges, barring Politically Exposed Persons (PEPs) from serving on these committees, and instituting strict new protocols for external auditor appointments, regulatory reporting, and the management of trade disruptions.

The guideline outlines a “hybrid approach” to supervision, blending “Compliance-Based Supervision,” which ensures adherence to rules, with a forward-looking “Risk-Based Supervision (RBS)” model. The RBS approach allows the ECMA to proactively identify emerging risks and focus its resources on entities deemed “high-risk.”

Here are the most significant changes detailed in the new framework:

Independent Committees to Govern Exchanges

To better manage conflicts of interest, the ECMA now requires all “trading venues”—including securities exchanges, derivatives exchanges, and over-the-counter markets—to establish a special committee responsible for overseeing the exchange’s regulatory and supervisory obligations.

The guideline emphasizes the committee’s independence, which must be maintained separately from the exchange’s operational and business functions. The rules explicitly bar certain individuals from serving on this committee, including:

Anyone affiliated with the trading venue’s management or daily operations.

Current or recent employees, executives, brokers, dealers, or issuers with listed securities.

Individuals with financial, professional, or personal relationships that could compromise impartiality.

“Politically Exposed Persons (PEPs),” defined as senior politicians, government officials, or executives of state-owned enterprises.

This independent committee will wield significant authority, including approving the exchange’s rules (e.g., membership, trading, and listing rules), regulatory budgets, and appointments of key regulatory personnel.

ECMA Approval Required for External Auditors

The guideline strengthens ECMA oversight of financial reporting by requiring all market infrastructures and Capital Market Service Providers (CMSPs) to obtain prior approval from the Authority for their external auditor appointments.

The selection process is multi-layered:

The entity’s audit committee, composed solely of non-executive board members, selects and recommends the auditor.

The board endorses the appointment.

Shareholders formally approve the appointment at the Annual General Meeting.

Finally, the entity must submit a formal request with supporting documents to the ECMA for final approval before the auditor can commence their duties.

Strict Timelines for Trading Disruptions

Securities exchanges now face precise and demanding timelines for reporting trading interruptions. If a connectivity disruption occurs during market trading:

The exchange must notify all market participants within thirty (30) minutes of the disruption.

An initial incident report must be submitted to the ECMA within two (2) hours.

A comprehensive follow-up report detailing the cause, actions taken, and resolution must be submitted to the ECMA within twenty-four (24) hours.

If a disruption occurs before market opening, the exchange must notify participants at least one hour prior to opening or as soon as the disruption is identified.

New Inspection Regimes and Data Access

The ECMA’s framework establishes a structured inspection process:

Routine Inspections: Systemically important entities, such as exchanges, Over-the-Counter Markets, and Securities Depository and Clearing Companies (SDCCs), will be inspected annually. CMSPs will be inspected according to the ECMA’s annual plan.

Spot Inspections: Unscheduled reviews conducted to investigate specific allegations, such as investor complaints or whistleblower reports.

Target Inspections: Focused assessments on “specific or sensitive areas of priority” or emerging trends.

To enhance transparency, the rules require that bid, ask, and execution prices be published in real-time. For OTC markets and websites where real-time reporting is not feasible, a maximum latency of thirty (30) minutes is permitted. Additionally, order books and post-trade data must be accessible within twenty-four (24) hours of a transaction.

Key Roles of SDCCs and SROs Clarified

The guideline clarifies the roles of other key market infrastructures:

SDCCs: Securities Depository and Clearing Companies are now recognized “as SROs (Self-Regulatory Organizations) by default.” This affirms their authority to implement rules and supervise their participants, including clearing members and settlement banks. SDCCs must also perform daily reconciliation of securities records against issuer registers to ensure accuracy and mitigate risk.

SROs: For other SROs, such as trade associations, establishing a “Client Compensation Fund” is not mandatory. However, an SRO may choose to create one, and the ECMA reserves the right to require an SRO to establish such a fund if it is deemed necessary to protect client interests and address specific market risks.

The document is accompanied by extensive reporting templates that all regulated entities must use, covering monthly transaction reports, quarterly financial and complaint reports, and annual compliance reports.