13 December 2012

Zambia: LuSE Launches Bond Trading Tier

THE Lusaka Stock Exchange (LuSE) has launched a bond trading tier targeting commercial banks in the country.

LuSE chairperson Friday Ndhlovu said that the newly-launched bond tier targeted commercial banks and other institutional investors wishing to trade in Government bonds on the secondary market.

Mr Ndhlovu said the bond would contribute to development of the markets for Government bonds.

In a speech read for him by his representative Jacob Mwanza, Mr Ndhlovu said LuSE would ensure that it established a transparent and orderly market for bonds trading to take effect as well as achieve price discovery.

"The process has not been easy, but (it) is worth noting that all parties involved were united in the ultimate goal to achieve the end, and upon becoming members, players will have access to the automated trading system via direct connectivity," he said.

He said the players would have visibility to the full order book on the bid as well as be recipients of corporate actions and end-of-day information on prices.

"It is easy to anticipate all the good that may come out of this action, but and I hope and believe the market is behind this move as it aims for the benefit of all market participants," he said.

And Bank of Zambia (BoZ) Governor Michael Gondwe said the bond trading tier would facilitate the growth of trading and liquidity in the market as well as enhance transparency and price discovery.

Dr Gondwe said the development of the operations of secondary markets of Government securities was one of the key drivers that would foster development of financial markets in Zambia.

He said it was a well-known fact that capital markets in the country were still at a lower level of development and were generally characterised by a small investor base.

The capital markets lacked liquidity and depth in the full range of financial and investment products that would otherwise make them attractive to a wide investor base.

"it is gratifying to note that LuSe has taken the first step in developing the bond trading tier on its platform.

"BoZ welcomes such efforts and we are confident that this initiative will contribute to the development of a viable and deep domestic bond market," he said.

Dr Gondwe said creating a bond market membership category on the LuSe trading platform would introduce active trading of bonds in the financial markets, adding that the bond tier would allow commercial banks to trade without going through a broker, hence reducing the transaction costs.

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