Center for Federalism Studies

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Browsing Center for Federalism Studies by Subject "Capital markets"

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    An Assessment of Ethiopia's Law and Emerging Practice of Licensing Securities Exchanges
    (Addis Ababa University, 2025-05-01) Ashenafi Yirga; Solomon Abay (PhD)
    The establishment of a functional securities exchange system is a critical milestone in Ethiopia‘s transition toward a diversified and competitive financial sector. Ethiopia‘s Capital Market Proclamation No. 1248/2021 and Directive No. 1009/2024 mark a significant regulatory departure, introducing a dual licensing model that formally establishes the Ethiopian Securities Exchange (ESX) while also permitting private entrants. This thesis examines the Ethiopian legal and regulatory framework governing the licensing of securities exchanges, with a specific focus on its conduciveness for private-sector-led capital market development. Guided by the central research question—whether the existing laws and emerging practice enable inclusive exchange formation—this study employs a doctrinal legal analysis supported by empirical insights from interviews with key stakeholders, including regulatory authorities, legal practitioners, and representatives of the private sector. The findings reveal that while Ethiopia‘s Capital Market Proclamation No. 1248/2021 and subsequent directives demonstrate a robust commitment to investor protection and market stability, they impose considerable legal, financial, and operational burdens that may deter private sector participation. High minimum capital requirements, expansive governance and technological standards, and significant regulatory discretion hinder accessibility and legal predictability. Although regulatory authorities defend these measures as necessary for systemic resilience, the lack of clear procedural safeguards and limited interest by private actors suggest a regulatory environment more aligned with state-driven market consolidation than open competition. The study concludes that, without deliberate review to enhance transparency, reduce entry barriers, and encourage inclusive participation, Ethiopia‘s licensing regime risks constraining the very market dynamism it seeks to promote. Accordingly, the thesis proposes actionable recommendations aimed at fostering a more enabling, transparent, and proportionate regulatory environment for future capital market development