The Malawi Stock Exchange (MSE) in collaboration with the Reserve Bank of Malawi says will automate its trading processesand replace the manual system currently in use with the modern systemto improve the efficiency of trading processes.
The project will involve establishment of an Automated Trading System (ATS) at MSE and introduction of electronically held certificates at Reserve Bank of Malawi Central Securities Depository (CSD).
Operations Manager for Malawi Stock Exchange, Esnat Chilije said in aninterview that the automated system of trading will bring several benefits to both the clients and MSE.
"This new system will be very efficient as it will shorten settlement of shares. It will also be easy for the shareholders to use the new system.
"On the other hand, the use of paper certificates holds many risks as they can be lost or stolen but the electronically held certificates will deal away will such problems,"she said.
Chilije said that electronic trading is expected to commence by end of May 2018 and only securities that have been transferred and registered in the CSD will be traded in the automated trading system.
She further said dematerialization process of the existing paper certificates which commenced onApril 30 this year will run till September.
Chilije, therefore, said shareholders are required to open investor accounts and migrate their securities from paper-based title to electronic ones in preparation for the trading of electronic based securities.
"Current shareholders are consequently required to contact a registered stock broker or custodian where they will complete a Stock Holding Declaration and Consent to Dematerialize form.
"Upon presentation of the physical certificates, a signed and stamped copy of the form will be provided to the holder," she explained.
Managing Director for Cedar Capital, a stock blockers company,Armstrong Kamphonji commended the MSE for automating their trading system, saying this will ease the trading operations at the stock exchange.
"Currently, brokers physically visit the stock exchange to trade shares with the MSE. But with this automation, we will trade via the computer without necessarily going to the stock exchange.
"This will also make trading more transparent as brokers will enter orders from each client separately on the trading system," he said.
Kamphonje also said the physical share certificates areprone to various risks like loss or theft which delay trading of the shares when one wants to sell and cash in their investment, as trading cannot take place without the physical certificate being presented.
He added that converting of shares to electronic form also enables transfer secretaries to handle increased number of transactions while reducing the possibility of human error.
"Imagine in markets where over 1,000 shareholders transact every day! The transfer secretaries would be overwhelmed with work to transfer shares from one shareholder to the other. This is done automatically in the depository based on instructions from the investors," he explained.