FTS consortium wins CSD bid

A consortium led by the First Transfer Secretaries (FTS) has won the bid to establish a Centralised Securities Depository (CSD) company for Zimbabwe's capital markets, which will operate as an adjunct of the Reserve Bank of Zimbabwe (RBZ)'s national payment system.

The Securities and Exchange Commission of Zimbabwe (SEC) yesterday announced Chengetedzai Depository Company Limited emerged the best bet after a series of tests that assessed business proposals, corporate profile, financial strength, technical capacity and other criteria, ahead of four competitors who may bounce back as shareholders.

The consortium comprises FTS, Zimabwe's largest transfer secretaries by number of listed counters, Interlink Group, Chartered Systems Integration, BancABC, NMB Bank, Stanbic Bank, Central Depository Services (India) Limited (CSDL) and CMC Limited, a division of the Tata Group and India's leading IT solutions provider.

CSDL runs the CSD for India's Mumbai Stock Exchange, one of the world's leading bourses, based on a system written by CMC.

The consortiums' assignment is to build a digital platform for the electronic clearing and settlement of securities, which could go live as early as June next year, completely de-certificating all tradable
securities by way of a book-entry system.

The network would facilitate a straight-through processing of securities on a payment-versus-delivery (PVD) basis under which a register of securities would be kept in electronic form and ownership would change simultaneously as payment is confirmed on a matched-deal basis.

"Our estimation is that it should be running by June (next year)," SEC CEO Alban Chirume said.

"We see it as the backbone of the computerisation of capital markets."

The CSD company would issue securities identification numbers (SIN) in lieu of paper certificates and earn its income primarily from statutory fees charged on every clearing and settlement transaction.

The system will integrate securities trading firms, licenced brokers, banks, securities custodial services companies, individual investors, the Zimbabwe Stock Exchange (ZSE), money and bond markets and the proposed commodity exchange, ultimately linking up with the RBZ's national payment system.

Chengetedzai Depository Company has leveraged its financial and technical capacity by courting banks and firms with vast experience in CSD administration as shareholders.

Khulekani Bruce Dzowa, the winning bidder's project steering committee head, said the consortium roped in CSDL and CMC Limited because SEC had made it a requirement to provide a system that had been in use for no less than five years in an emerging market.

"It will change the landscape of capital markets in Zimbabwe," Dzowa said.

"Zimbabwe is the fifth or so in Africa in terms of the number of listed companies, but the ZSE is one of the least modernised. We've to integrate the ZSE and other capital markets with the rest of the world.

"We also want to open up our shareholding and make it as broad-based as possible. We may even co-opt some of the losing bidders."

The system is primed to cut both transaction costs and the settlement cycle of participating exchanges, particularly the ZSE, which currently runs a T+7 settlement cycle under which payment and securities delivery are due seven days after a buy/sale deal.

It will also boost the capital off-shoring capacity of Zimbabwe's capital markets and lay the foundation for ZSE's live share trading system, pioneering the phase-out of its call-over system based on the bourse's
trading floor.

Under a live trading system, buy and sell deals would be sent to an electronic network through which bids and offers are matched and deals confirmed.