BoT digitises forex matching system

DAR ES SALAAM: THE Bank of Tanzania (BoT) yesterday introduced an Electronic Matching System (EMS) for the Interbank Foreign Exchange Market (IFEM), marking a significant step towards enhancing transparency and price discovery in the country’s foreign exchange market.

The digital platform, which automatically matches buy and sell orders in the wholesale foreign exchange market, is expected to replace manual negotiations and provide a more transparent and rule-based trading environment. BoT’s Director of Financial Markets, Mr Emmnauel Akaro, said the system digitalisation is an important milestone in the ongoing reforms aimed at improving transparency, efficiency and credibility in the foreign exchange market.

“The platform will strengthen price discovery and provide market participants with a fair and orderly trading environment. “We expect the new platform to enhance market liquidity, improve efficiency in foreign exchange trading and strengthen confidence among market participants,” said Mr Akaro.

He said the initiative is modelled on globally recognised market technologies and supports the country’s ambition to build a modern and competitive financial sector capable of supporting economic growth and the aspirations of the country’s Vision 2050.

Approximately 29 out of 32 commercial banks already joined the platform, while the remaining three were finalising procedures and are expected to begin participation within the week. Under this arrangement, banks and major exporters will be able to participate directly in the market, while non-bank participants will be permitted to sell foreign currency through the platform, with purchases conducted through commercial banks.

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According to the central bank, the system currently supports spot foreign exchange transactions involving the shilling and the US dollar, with settlements completed within two business days.

The minimum transaction size is 100,000 US dollars and subsequent orders will increase in multiples. BoT’s Deputy Governor, Mr Yamungu Kayandabila said the initiative marks a major milestone in the country’s ongoing financial market reforms, saying the platform will enhance transparency, efficiency and price discovery in the foreign exchange market.

The country has made significant progress in strengthening its financial markets through reforms such as the implementation of a new code of conduct and foreign exchange market policies, helping the country narrow the gap with more developed markets.

ACI Financial Markets Association (ACI FMA)’s Vice-President Ms Catherine Mwita underscored the EMS initiative, describing it as a key tool for emerging markets. She added that the system will also enhance liquidity in the foreign exchange market, benefitting both market makers and market takers and contributing to a more efficient financial market in the country.