'Pre-trading of stocks distorts prices'

The Ghana Stock Exchange's (GSE) pre-trading operations have been challenged, as not conforming to global stock exchange trading standards and having a tendency to distort share prices.

“It is not done anywhere as far as I know; there's no pre-trading time before the official trading on the bourse at any of the active trading platforms in the global financial industry.

“It is something they should just do away with because we are growing and we need to emulate international best practices,” Kwabena Antwi-Situ, Manager for Audit and Advisory at consulting firm Deloitte Ghana, made this observation in an interview with the B&FT in Accra.

While the official time of opening of the GSE for trading is 10:00 am, the bourse runs a daily pre-open trading session from 9:30 am till the official opening, a practice that it says affords dealers increased contact hours with their clients during the trading day and boosts liquidity.

It is also meant, according to the GSE, to afford non-resident investors in time-zones different from Ghana's greater opportunity to do business with their local brokers.

But Mr. Antwi-Situ, speaking at a one-day capacity-building workshop organised by the Association of Chartered Certified Accountants (ACCA) Ghana and Deloitte for financial reporters, said the practice is not just alien to the global stock-trading industry but also distorts share prices.

“At the end of the day your closing price should be the same as your opening price (on the next day). But because of the trading that goes on before the official trade, you find some of the companies having their closing prices (on the previous day) not the same as their opening prices (at the start of official trading the next day).

“This practice distorts the price you knew as at yesterday, based on which you would have made a decision,” he said.

Speaking on the reason for the workshop, Mr. Norman Williams, Head of ACCA Ghana, said it formed part of the institution's strategic development partnership with the media to promote financial sector development.

“ACCA recognises the value that effective finance functions can bring to every organisation. Whether in times of economic growth, recession or gradual recovery, finance professionals need to provide the information required by managers to make strategic decisions and achieve day-to-day operational success.

“Each member of the finance team has an important role to play; whether striving to be an influential business partner, meeting financial reporting requirements or delivering efficient transaction processing.

“The challenge is to create the appropriate finance function structure and provide the necessary support to enable each individual deliver their role most effectively.”

ACCA is the global body for professional accountants, offering business-relevant and first-choice qualifications to people who seek a career in accountancy, finance and management.

It has a 154,000-member base with 432,000 students in 170 countries. ACCA's office in Ghana was established in 1997. It has more than 9,000 students and about 1,500 qualified members and affiliates in the country.