The Sunday Mail
Enacy Mapakame
THE establishment of an Alternative Trading Platform (ATP) by the Securities and Exchange Commission of Zimbabwe (SecZim) is behind schedule as rules and regulations governing its operations are still under consideration by the Finance and Economic Development Ministry.
An ATP is designed to provide relatively accommodative thresholds and regulations for companies and investors that are interested in trading in securities.
Local capital markets regulator, SecZim, had planned to start processing applications for the ATP by April 2016.
But SecZim CEO Mr Tafadzwa Chinamo told The Sunday Mail Business last week that the regulator was still waiting for approval of rules and regulations governing operations of the platform by the parent ministry.
“The process is still at the ministry; we sent them a set of the rules and regulations that will govern how the market will operate. So we are still waiting for approval from them,” said Mr Chinamo.
Unlike the ZSE, companies trading on the ATP do not have to be listed as the system only provides a marketplace for buyers and sellers of securities.
According to the framework released by SecZim on October 9, 2015, companies that intend to operate an ATP should have an asset cover of 250 percent of total liabilities, US$100 000 insurance cover and positive cash balances.
In developed markets, ATPs are used by big institutional investors to trade very large parcels of listed securities so that mega deals do now sway market prices.
The local ATP is expected to boost listed and unlisted companies’ means of raising capital cheaply and efficiently in a challenging economic environment. However, there are concerns the ATP might not be readily embraced by investors owing to the obtaining liquidity challenges.
Economist Dr Gift Mugano said the ATP was ideal in a “normal situation” and most investors in developing countries were speculative, seeking to make quick returns on capital markets.
He added that there were uncertainties over the broader economy that could affect an otherwise noble idea.
The economy is grappling with low liquidity, depressed global commodity prices and the slowdown in the Chinese economy, a major buyer of local minerals.
Such uncertainties, Dr Mugano said, coupled with weak sentiment on the Zimbabwe Stock Exchange could dampen the ATP.
“Even if we have an alternative market, it will take the tone of the main exchange, so it will be difficult for both the domestic and foreign investors. As long as we have (a) liquidity crisis in the country and depressed prices of commodities, it will remain a challenge to invest,” said Dr Mugano.
SecZim, however, indicated that it has so far received two applications for the ATP, which will be processed once regulatory approval was granted.
“The Ministry of Finance is our line Ministry and anything to do with gazetting rules goes to them first. What we did was to draft rules that will govern the operations of the ATP, presented it to the market for their input, which we will factor in.
The ministry wants to know if (we) addressed all the market’s concerns and questions, which believe we did,” said Mr Chinamo.
Last October, SecZim announced it would issue licences for establishment of a flexible trading platform allowing private companies to raise capital by selling securities to the public.
In terms of regulation, SecZim will play only a minimum role, limited to supervisory functions over trade and settlements.
It is the norm the world over that ATPs tend to self-regulate.
