3 May 2017

Zimbabwe: ZSE Reduces Trades Settlement Cycle

THE Zimbabwe Stock Exchange has reduced settlement cycle of trades to three days (T+3), a move that is expected to enhance the capital markets and encourage investments on the local bourse.

T+3 basically means 'trade date plus three business days.' This means investors will get paid sooner (after three business days) in the event of a sell or receive their stock quicker in the case of a buy. Prior to this, it would take up to five business days to settle a transaction after sale of shares, which is known as T+5 settlement.

In a joint statement by capital markets regulator, Securities and Exchange Commission of Zimbabwe, Chengetedzai Depository Company Limited and the ZSE, this is expected to bring convenience and efficiency on the local bourse.The move also comes after introduction of some key enablers last year meant to improve the capital markets in the country.

"CDC, the ZSE and would like to advise capital market players, issuers of securities, investors and the general public that the settlement cycle for trades in ZSE listed equity securities will change from T+5 to T+3 with effect from 2 May 2017.

"The shortening of the settlement cycle is expected to further improve the capital market in Zimbabwe through introducing international best practice, reducing counter-party risk and increasing convenience for the investing public," reads part of the statement.

Last year, the other measures were introduced to enhance trade on the bourse such as the CSD penalties framework, settlement of trades using central bank money and the introduction of collateral security to manage settlement risk.The ZSE ranks among the region's top ten stock exchanges.

The local bourse fully automated in July 2015 as it completed its transition from manual call over system to a more efficient electronic trading system.

Recently, the bourse saw the return of the bond market, after two decades the debt market had stopped operations in a move aimed at improving the capital markets and help companies raise money. The ZSE has since indicated plans to introduce a smaller bourse for small to medium enterprises (SMEs) in the near future.

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