Rebates to improve CSD efficiency: ZSE

LIVINGSTONE MARUFU

The Zimbabwe Stock Exchange (ZSE) will introduce rebates on the central securities depository (CSD) levy on November 1 as it moves to reduce costs and improve operational efficiencies.

A CSD is a facility that holds and administers securities as well as enabling transactions to be processed by means of book entry.

ZSE will tussle it out with the 7-year old Chengetedzai Depository Company in the CSD space.

ZSE chief executive officer Justin Bgoni told Business Times that the new platform will be more efficient as it will allow real time confirmation of trades.

“We are working on a new incentive which entails a rebate on the statutory CSD levy to be collected by ZSE on all trades settled through our depository.  The rebate  will be implemented with effect from  November  1 2021 and is expected to reduce costs to participants as this improves market efficiency,” Bgoni said.

He said this rebate will be extended to all issuers whose securities are settled through the ZSE Depository.

The introduction of a rebate comes after the Competition and Tariff Commission of Zimbabwe  recently ordered ZSE to scrap the discounts it had rolled out to issuers to use its depository as the move did not promote fair competition.

The Commission deemed ZSE’s proposed incentive (discount on listing fees) as a restrictive practice in terms of the Competition Act on the basis that the discount offered was based on a revenue line outside the depository business.

The ZSE Depository has already attracted six issuers—Amalgamated Regional Trading Holdings Limited, AXIA Corporation Limited, FBC Holdings Limited, Seed Co Limited, Simbisa Brands Limited and Truworths Limited—which will migrate to the platform on November 1.

Bgoni said ZSE’s thrust is to provide better service to the customers and market participants.

“For retail investors, the immediate gain will be the reduced settlement charges,” he said.

The CSD operations began on October 1 2021 following the approval by the Securities and Exchange Commission of Zimbabwe.

But there was a slow reaction by most counters to participate in CSD.

Bgoni said more counters will come through but currently, the bourse is still populating and will share with the market in due course.

He said the key functions of the CSD still remain the same, however, the only major difference is in terms of system used and how participants interact with the depository.

Stakeholders were advised that the launch of the ZSE CSD will not affect their trading or custodial relationships.

Bgoni said the introduction of new products will be made in due course.

He said the use of different systems and compatibility in the past was a hurdle when it came to launching new products.

The bourse will have a collateral fund to cater for a failure in settlement.

“Yes the collateral fund is in place. The collateral fund is prescribed by our regulations and the regulations of the RBZ as the settlement bank. The collateral fund is money that belongs to the custodian banks participating on the ZSE depository and not ZSE per se and will be depended on the trading activity handled by each custodian bank,” Bgoni said, without stating the size of the fund.

He said that it was long overdue that an Exchange also owns its depository  as per international best practice.

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