25 June 2012

Zimbabwe: Electronic Bourse On Course

The Zimbabwe Stock Exchange is trudging closer to an electronic securities settlement system - the Central Securities Depository - as parties to its establishment are set to sign the agreement next week.

Parties to the CSD company were scheduled to sign a shareholders' agreement last Friday, but the event was cancelled after one of the shareholders requested more time to study the document.

The CSD company will have Chengetedzai, ZSE, ZB Bank, the Infrastructure Development Bank and the National Social Security Authority as the shareholders.

Securities Commission of Zimbabwe chief executive Mr Tafadzwa Chinamo said the shareholders should sign the agreement this week and then quickly establish a board of directors.

"We have given them more time to sign the agreement. When that is done they will then appoint a board of directors. Once that has happened we will demand performance. The board would have to put in place an implementation plan," said Mr Chinamo.

He said that once the shareholders agreement has been put in place a board of directors will automatically follow, which would give SECZ the point of reference tasked with driving the project.

SECZ is the country's supreme regulatory authority on the management of domestic capital markets, which covers the stock exchange.

Mr Chinamo said after that the securities regulatory authority will be able to give timelines on deliverables, but expressed hope significant ground would have been covered by December.

The CSD is a modern and advanced way of securities trading which would enable recording of transactions through an electronic book entry system.

The CSD, estimated to cost US$2,5 million, is a safer and efficient trading and settlement system. Its establishment will result in what is known as dematerialisation of certificates.

It is expected that the CSD would do away with arbitrary determination of share prices as well as avoid the influence of cartels on the prices of shares.

The broader vision, according to ZSE sources, was to become a member of the Federation of World Exchanges, which requires members to scrap physical securities trading and exchange of share certificates.

The World Federation of Exchanges is an international organisation based in France and handles business policy issues affecting stock exchanges.

It handles issues of cross-border investing and provides a platform to settle many debates arising from issues affecting the investment industry. As of April 2007, the federation had a membership of 55 exchanges.

Members account for more that 97 percent of the world stock exchange markets capitalisation with the combined value estimated at US$35 trillion.

After establishing the CSD the ZSE is also expected to demutualise, a process that will see the bourse transforming from a mutual or member-based society to an incorporated company.

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