SHAREHOLDERS of the central securities depository (CSD) are set to raise US$1,5 million to finance the rollout of the system expected to improve trading of shares on the stock market.
Two projects -- the Automated Trading System, being run by the Zimbabwe Stock Exchange (ZSE) and the Chengetedzai Depository Company Ltd-driven CSD -- are currently on course to automate trading on the local bourse.
A CSD is a facility for holding and administering securities, as well as enabling transactions to be processed by means of book entry.
Chengetedzai Depository Company Ltd chief executive, Campbell Musiwa said the "go live" date for the CSD was scheduled for October this year.
"The shareholders, the majority of whom are institutional investors, will be following their rights. We have an underwriter for the rights issue who is also a shareholder," said Musiwa.
He added: "The idea is to implement the CSD first for purposes of running a depository and handling the clearing and settlement of trades. This is where the paper certificates are eliminated as shares will only be handled in an electronic form after dematerialisation has taken place."
Musiwa said the ZSE would then automate the trading system to be interfaced with the CSD system.
Chengetedzai Depository Company Ltd owns 49% of the institution after winning the tender in 2010, 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%.
Most countries with active capital markets have CSDs to provide custody and record-keeping services, which assists in attracting capital and making their economies more vibrant.
With CSDs, settling the enormous volume of securities traded every day in the world's capital markets is fast, cost-effective, and secure.
The system also eliminates the risk of fake certificates, since only those certificates authenticated by the Transfer Secretary would be deposited.
For instance, a CSD is providing efficient depository services to the financial markets to promote investments and economic growth in Ghana.
Rather than issuers having to deliver, re-register, and re-issue individual certificates with every trade or every time there is a stock split (issue of new shares in a company to existing shareholders in proportion to their current holdings), the CSD serves to secure the certificates in a single location.
The cost of performing transactions through a CSD is cheaper than performing transactions with certificates of ownership, while also increasing the securities turnover due to completion of ownership transfer within a specified timeframe.
Zimbabwe is rapidly moving towards automation of the local bourse through the passing of the Securities Act in 2008 with recent amendments providing a legal framework for the operation of the CDS.