'CSD a game changer for local markets'

HARARE - The introduction of the Central Securities Depository (CSD) is expected to significantly improve the liquidity crisis in Zimbabwe, analysts say.

Campbell Musiwa, chief executive of the Chengetedzai Depository Company (Chengetedzai), said the system will improve liquidity by attracting additional domestic and foreign investors as the new settlement, clearing and trading standards are internationally recognised.

“We already have around 60 percent foreign investor participation on the local bourse, but this is likely to increase in the near future due to reduced settlement time frames and improved security on transactions and share certificates,” he said.

Zimbabwe has been experiencing a biting liquidity crunch since 2009 when the southern African country abandoned its worthless currency for a multiple currency regime dominated by the United States dollar.

Musiwa noted that the establishment of the CSD will also offer market participants enhanced inter-operability and efficiency in the global post-trade arena.

He added that the main advantages of the CSD system was that it ensures the bulk of securities transactions are processed in an electronic book entry form, thus expediting the settlement of equity transactions and ensuring compliance with international best practice.

Market experts also noted that unlike the current “open cry” manual trading system, the automated trading system will reduce the risk of human error, fraud and settlement delays.

“This results in increased confidence in the market. Furthermore, automation unlocks liquidity, cuts costs and increases the general

efficiency of equity market trading,” said a stock market analyst who preferred anonymity.

The net effect will be an improvement in turnover and profitability in the industry.

Zimbabwe is the ninth African country to adopt the technology, after Botswana, South Africa, Ghana, Nigeria, Egypt, Kenya, Zambia and Mauritius.

As a central securities depository, Chengetedzai will look to leverage linkages to other CSDs around the world to offer clients the benefits of cross-border interoperability, as well as provide services in local markets as a pan-European institution.

Clients will also benefit from the speed inherent in settlement internalisation, if both seller and buyer accounts are maintained within the books of the Chengetedzai CSD.

 

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