SHAREHOLDERS to the Central Depository System (CDS) have indicated that the electronic equities trading facility on the local bourse would be up and running by early next year.
REPORT BY KUDZAI CHIMHANGWA The CDS is a facility for holding and administering securities, as well as enabling transactions to be processed by means of book entry.
The Zimbabwe Stock Exchange (ZSE) uses an old manual trading system, with a certificated registry, where share certificates can be defaced, misplaced or manipulated by participants. Securities Commission of Zimbabwe chief executive officer, Tafadzwa Chinamo, told Standardbusiness that the CDS board had indicated to the commission that the implementation matrix was solid and on track.
“The board has been meeting frequently while the shareholders have made a commitment that should there be a cash call, they are in a sound position to fulfill their obligations,” said Chinamo. He said that a system that would be suitable for the local market would be identified and brought to fruition by early next year.
A local consortium, Chengetedzai Depository Company Ltd, owns 49% of the institution while government interests are represented by the National Social Security Authority with 13% shareholding, ZB Bank (13%), ZSE (15%) and the Infrastructure Development Bank of Zimbabwe holding 10%.
Chengetedzai Depository Company Ltd primarily owned 100% of the automation project after winning the tender in 2010, but government felt that it was not meant to be a private sector affair and consequently chipped in with a 51% stake.
The use of the new system, which several stock exchanges the world over are already using, will provide assurance of transparency to investors by detecting fraudulent activity or manipulation in share registers.
Stock brokers and asset managers on the ZSE were allegedly using clients’ securities to borrow personal funds while others held onto certificates for purposes of duplication.
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The bourse presently uses a call over system on the floor of the stock exchange and is operating on a T+7 transaction settlement system against physical delivery of scrip, where delivery and payment of share transactions can take seven days.
Chengetedzai Depository Company chief executive officer, Campbell Musiwa, said the focus was presently on the implementation aspect, as use of the new system would translate to a T+2 settlement regime with efficient clearing and settling of securities.
“The turnaround time will significantly improve and once the exchange is running on the platform, efficiencies will be witnessed in trading time from T+7 to T+2,” he said.
“The line of thinking within the Sadc region is on the integration of various exchanges, trading through an automated system.”
He added that dual-listed entities would benefit from the new platform, as red tape associated with the current system would be done away with.
Musiwa said most trade activity taking place on the ZSE was driven by foreign investors and with the inception of the CDS, there would be more transparency and efficiency in trade and more investors would come to the local bourse, translating to improved liquidity flows.
According to the latest World Economic Forum 2012-2013 Global Competitiveness Report, Zimbabwe ranks 75 out of 144 countries in terms of regulation and supervision of securities exchanges.
The passing of the Securities Act in 2008 and recent amendments have also provided a legal framework for the operation of the CDS.
The current procedure for trading dual-listed shares is that they be delivered in negotiable order to a Zimbabwean broker with proof for the inward transfer of funds to Zimbabwe.
A Zimbabwe broker delivers the shares and documentation to the ZSE to approve the removal after which the transfer secretary issues a removal receipt.
