CSD trials begin

HARARE - Chengetedzai Depository Company (CDC) is now conducting trials of the central securities depository (CSD) system as part of efforts to fully automate trading on the Zimbabwe Stock Exchange (ZSE) by year end.

CDC – a company formed to establish and operate the CSD for Zimbabwe’s securities industry – won the right to establish the depository in December 2010 in a tender from the Securities Commission of Zimbabwe (SecZim).

SecZim chief executive Tafadzwa Chinamo said, “There is a parallel system that is taking place on the CSD.”

“For everything that is taking place (on the stock exchange) there are also mirroring the same thing on the CSD”.

“It’s a project that should become more visible over the next couple of weeks… as to how investors or shareholders are going to be affected and impacted by this. According to them maybe by end of June or July it should be up and running. We should be settling our trades on the ZSE via them,” he said.

The CSD allows brokers and financial companies to hold their securities at one location where they can be available for clearing and settlement.

This is done electronically making it much faster and easier than the traditional way by which physical certificates had to be exchanged after trade.

Demutualisation of the exchange is at the centre of the current reforms.

Once demutualised, the ZSE becomes fully exposed to market forces.

The CSD shareholders will comprise CDC,  ZSE, ZB Bank, the Infrastructure Development Bank and the National Social Security Authority.

Through the four State-controlled institutions, government will have a combined 51 percent shares while CDC would hold the remaining 49.

Chinamo added that the local bourse has also commenced its automation project, with providers of the system, Pakistan’s Infotech Middle East

FZ LLC (Infotech) arriving in the country two weeks ago.
“They have been engaging all the stakeholders. So the two projects should essentially be running by the end of the year,” he said.

This comes as the ZSE anticipates its automated trading system (ATS) to go live during the second half of the year.

ZSE’s chief executive Alban Chirume at the announcement of the deal said that Infotech will supply and install the Capizar ATS after signing the contract.

The automation of the bourse has been on the agenda since 2000 although plans have been stalled due to liquidity constraints

Chirume, a former Securities Commission of Zimbabwe boss, said Infotech will also review the ZSE’s business processes, prepare a request for proposals, advise the local bourse on the process of vendor selection and prepare the system for implementation.

“The immediate next steps are the study of the local environment, and the gap analysis to be carried out by the vendor in order for us to finalise the project plans,” he said.

“We are expecting that in three to four months’ time, the project will be in the training and acceptance testing stages with the final live date being out target within a period of six months from now.”

The automated trading system is expected to augment efforts to attract foreign direct investment (FDI) into the country.

It is also expected to boost equities’ daily turnover to around $5 million as global trends indicate that upon conversion to automated trade, turnover increases by a factor of five.
The local bourse’s daily turnover — which is the value of shares traded per day — currently averages around $1 million.

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