Ndamu Sandu
Trades on the Victoria Falls Stock Exchange (VFEX) are on a pre-funded basis while custodian banks are mandated to maintain a US$10,000 collateral deposit at the central bank among a raft of measures to mitigate settlement risks on the bourse.
Trading on VFEX began on Monday with one listed issuer, Seed Co International.
It is expected that other dual listed counters PPC and Old Mutual Zimbabwe will list on the bourse.
The trio was told to exit the Zimbabwean dollar board when Zimbabwe Stock Exchange resumed trading in August after a month closure to pave way for investigations into alleged illicit deals blamed for the routing of the local unit against major currencies.
VFEX said the ability to identify and monitor risks on an ongoing basis was crucial for a clearing and settlement organisation and avoid, as much as possible, situations that can create unacceptable levels of risk for the clearing and settlement organisation and its participants.
“It is against this background that trading on VFEX will be on a prefunded basis.
This means that an investor who would like to place a buy order in the market should ensure that the funds are sitting with his participant before the execution of the trade on the VFEX Automated trading system,” the bourse said.
“During the trading session the participant will have real time access to the trading activity on his client accounts and will either affirm or reject trades on the trading date during the open trading and post close trading session.
This measure is put in place to reduce settlement failure.”
According to the Operations Procedures Manual, all custodian banks “shall maintain a minimum collateral deposit of US$10,000-00 in their collateral sub-account at RBZ, specifically to cover securities settlement obligations on a normal trading day,” VFEX said.
“The collateral amount for each Custodian Bank shall be recalculated at the end of each month depending on the Custodian Bank’s exposure to the market.
The collateral amount shall be determined by figures from the previous month, which shall be calculated as follows: the average of the three highest daily figures for the month is multiplied by 300% (three days’ cover).”
A subsidiary of the Zimbabwe Stock Exchange (ZSE), VFEX was established to kick start the Offshore Financial Services Centre earmarked for the special economic zone in Victoria Falls.
The bourse is seen as a conduit of portfolio investments and foreign direct investment into Zimbabwe and Finance minister Mthuli Ncube says the long term ambition is to make VFEX a platform of trading securities in Africa in hard currency.
“Foreign investment is required to close funding gaps required to grow our economy.
As part of the global picture, VFEX is also expected to offer pension funds an opportunity to invest in foreign currency denominated securities, enhancing the ability of pension funds to diversify currency risks and therefore grow sustainable value for Pension Funds’ assets,” Ncube said at the launch of the bourse last week.
