15 February 2013

Zimbabwe: Central Securities Depository Soon to Be Operational

THE Central Securities Depository (CSD) will most likely be operational by half year while a tender for a settlement and clearing bank will be floated before the system goes live, an official said.

Chengetedzai CEO Campbell Musiwa said the system should be ready by half year as the company was currently in the process of finalising the necessary processes required to ensure the start of the platform.

The main advantages of the CSD system is it ensures the bulk of securities transactions are processed in an electronic book entry form, thus expediting the settlement of equity transactions and ensuring compliance with international best practice.

Unlike the current "open cry" manual trading system, the automated trading system will reduce the risk of human error, fraud and settlement delays. This results in increased confidence in the market. Furthermore, automation unlocks liquidity, cuts costs and increases the general efficiency of equity market trading.

The net effect will be an improvement in turnover and profitability in the industry.

Implementation, including the cost of the system, hardware and operational expenses, will cost approximately US$2 million.

The setting up of a CSD has brought about prompt and efficient clearing and settlement of trades while reducing some of the inherent risks in the process.

In South Africa, Strate Limited is the licensed CSD for the electronic settlement of financial instruments.

Its core purpose is to mitigate risk, bring efficiencies to the South African financial markets and improve its profile as an investment destination.

Strate handles the settlement of a number of securities, including equities and bonds for the Johannesburg Stock Exchange as well as a range of derivative products such as warrants, exchange traded funds (ETFs), retail notes and tracker funds. It has now added the settlement of money market securities to its portfolio of services.

In the USA, one of the largest CSD companies, the Depository Trust and Clearing Corporation (DTCC) offers equity clearing and settlement, fixed income clearing and settlement, asset (custody) services, OTC derivatives/trade repositories, wealth management and insurance services.

Last week, Econet Wireless called on the Zimbabwe Stock Exchange to quickly implement reforms aimed at modernising the exchange through the introduction of an electronic trading platform and a CSD in a bid to boost the relevance of its mobile money service EcoCash.

Econet said in a strongly worded statement the ZSE should shake off its elitist "old boys' club" image and urgently reform the share trading system of the ZSE as the current system is subject to abuse.

"It is time for the ZSE to become more accessible to ordinary people, and a proper vehicle for mobilising capital for companies," read the statement.

In an effort to speed up the process, Econet said it was willing to extend a "no strings attached loan" to the ZSE to buy an electronic trading platform that allows immediate and transparent settlement as in other countries such as South Africa and Kenya.

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