Thursday, September 19, 2013

ZSE Trade to get Computerized

Story by Jeffrey Mumba

THE Zimbabwe Stock Exchange (ZSE) is set to be computerized by next year, as the local bourse is rapidly moving towards adopting Information and Communication Technology in its trading methods. The computerization will run together with the central securities depository (CSD) expected to augment the settling of transactions.

A local consortium, Chengetedzai Depository Company was in 2010 awarded a tender to run the country’s first CSD system for purposes of running a depository and handling the clearing and settlement of trades.

Under the current tedious and old set-up, brokers must be physically present at the bourse daily in order to buy and sell shares. Worse still, the ZSE is presently operating on a T+7 (7 or more
trading days) transaction clearance system for delivery and payment of share transactions using manual trading, way behind world class standards.

However, the use of the new system would translate into a T+2 settlement system with efficient clearing and settling of securities. The adoption of automated trading systems is expected to be an enabler towards broadening the capital markets and providing much needed funding for local businesses.

“The idea is presently to implement the CSD first and the ZSE will then automate the trading system which will be intergrated with the CSD system,” Chengetedzai Depository Company chief executive, Campbell Vincent Musiwa said. Market observers say there is need for capital markets in Zimbabwe to embrace the paperless trading scenario where securities movement is managed in a book entry system. “This evolving demands the implementation of the central securities depository , which is a welcome development to enhance efficiency and reduce inherent risks associated with paper,” said Chengetedzai’s Risk & Compliance Officer, Gerald Katerere.

“Rather than firms or issuers having to deliver, reregister, and reissue individual certificates with every trade or every time a stock split, the CSDs immobilized, or secured, the certificates in a single
location” he said.

In the quest to attract capital and make their economies more vibrant, most countries with active capital markets have central securities depositories (CSDs) to provide the custody and record keeping services that enable the electronic transfer of ownership when investors buy and sell securities and initiate settlement. With CSDs, settling the huge volume of securities traded every day in the world’s capital markets is fast, cost effective, and secure.

Eliminating a paper based environment in the capital market by implementing the CSD will bring many benefits to the investors, issuers, market participants and the economy.

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