CHENGETEDZAI Depository Company has started opening accounts with stock brokers and custodians for the Central Securities Depository as it makes final preparations to launch the platform, Securities and Exchange Commission of Zimbabwe chief executive, Mr Tafadzwa Chinamo has said.
In an interview, Mr Chinamo said tests done on the system had proved satisfactory.
“A lot of ground has been covered, the system has been tested and I believe we are getting there, if there is anything that needs tweaking, it is very minor, we have started opening accounts with custodians and brokers which is a positive move,” he said.
The CSD will operate using the custodian model as opposed to the retail model. Under the custodian model, investors will have a choice of either going directly through a custodian for the purchase of shares, through a broker or through Chengetedzai, which is also now a custodian. Chengetedzai Chief executive Mr Campbell Musiwa said the country’s first CSD was ready and awaiting the final regulatory approval.
Mr Musiwa said there were two environments towards the launch of the CSD; test and live.
“They have done all the testing and have now gone live on a partial basis. We are taking a cautious approach, using other countries that have swallowed more than they can chew as case studies.”
He added that the system involves a manual process where data will be captured. “KYC is a physical process so it has to be done manually and this can also be more of a security feature.
“Mr Musiwa said some of the charges which formed part of the negotiation process have been dropped entirely. It’s an ongoing process and we continue to have protracted discussions. When the CSD is up and running, certain costs embedded in the transaction costs will fall away.”
However, brokers have raised concern over the custodian model questioning how efficient the system will be if the client places an order via a custodian. Most brokers said that their roles under the new system were not clear.
“There are issues to do with settlement; questions on who carries the liability particularly in the event that a deal is not settled. Brokers also need to know whether contribution to the guarantee fund will fall away since they will no longer handle cash or scrip,” said one broker.
Other issues which have been raised are around the capacity of the custodians to handle clients directly and whether Chengetedzai itself should be a custodian and if they have the right expertise.
The general line of thinking was that it would be difficult to trade scrip for a client whose account status you do not have knowledge of. “This would entail calling the custodian first and getting details; which in itself is a long process.”
They said it was not clear on whether brokers open accounts before the custodian or after the custodian and on the issue of who carries the liability.
“There are a lot of grey areas, which need to be cleared. They keep calling for meetings where they seem not to be keen to answer questions from brokers.
“We need them to come up with a process that is acceptable to both brokers and custodians. A system which will make the market efficient and not concentrate risk on one party,” said another broker.