Trade Automation, Transaction Costs and Performance of Securities Markets in East African Community, Within Member States
DOI:
https://doi.org/10.53819/81018102t2501Abstract
Despite the adoption of trade automation to enhance trading processes, the performance of securities markets globally remains suboptimal, with market participants reporting declining market capitalization and increased volatility. These challenges are aggravated by fragmented market structures, where each market include East Africa Community (EAC) markets operate with unique inefficiencies, such as limited access to real-time information and deviations from the efficient market hypothesis. High transaction costs, such as brokerage and settlement fees, further deter trading activity, eroding potential gains from automation. While trade automation is expected to streamline operations and improve price discovery, its implementation in the EAC has produced mixed results, with some studies suggesting it exacerbates market instability. The interplay between trade automation and transaction costs remains inadequately understood, particularly in emerging markets like the EAC. In particular, the research aimed to establish the effect of transaction costs on the relationship between trade automation and performance of securities markets in EAC. Utilizing a descriptive cross-sectional research design, secondary data were collected from the four established securities exchanges in the EAC for the period 2015 to 2024. The analysis employed regression techniques using Stata software to evaluate the relationships among the variables. The results indicated that transaction costs, particularly clearing and settlement fees, significantly moderate the relationship between trade automation and market performance of securities in EAC. Thus, policymakers and regulators should focus on reducing brokerage fees, which have a significant negative impact on market performance, by implementing streamlined processes and cost-effective policies. Additionally, clearing and settlement fees should be optimized while efforts to enhance performance through improved trading systems and better dissemination of market information are crucial, as efficiency positively influences market outcomes.
Keywords: Trade Automation, Transaction Costs, Performance, Market Securities, East African Community
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