The Sunday Mail
ONLY a third of investors in the 44 counters that have so far gone live on the Zimbabwe Stock Exchange (ZSE) have converted their share certificates from physical to electronic form as the bourse continues to roll out its Automated Trading System (ATS), The Sunday Mail Business has gathered.
Through dematerialisation shareholders give up their paper share certificates in favour of e-based ones. An ATS brings convenience to traders and investors as it brings increased security and efficiency.
Chengetedzai Depository Company chief executive Mr Campell Musiwa said only a few counters had been able convert more than 50 percent of their shares to electronic form since phased dematerialisation began in September. It was not immediately clear why the conversions were slow.
However, minority shareholders recently raised concern over increased transaction costs arising from the new share management system. But Mr Musiwa said the CDC is “happy with the progress so far bearing in mind the dematerialisation process is hardly three months since commencement”.
The CDC, in which Government is a key shareholder, administers the ZSE electronic platform and has been gradually on-boarding stocks, starting with only three – FBC, CBZ and Cottco – on September 3.
The outstanding companies are currently working to fulfil the Central Securities Depository (CSD) requirements for on-boarding.
It is widely expected that the ZSE will be fully automated by the end of the first quarter, with the settlement periods reduced to T+5 (transaction plus five days) from the present T+7.
“A few counters have now gone past the 50 percent mark in terms of shares converted onto the electronic platform. A number have dematerialised 35 percent to 40 percent of their shares,” said Mr Musiwa in an e-mailed response to queries from this publication.
He said dematerialisation of shares would be conducted by custodians given the shift from the broker-centric to custodical-centric model. The role of the stockbroker will be limited to trading, while transfer secretaries (TS) will be responsible for the final commitment of shares onto the CSD once documents received from the custodian have been reconciled with TS records.
“Brokers’ clients will be channelled to a custodian who will carry out a know-your-customer process as well as customer due diligence exercise. Once the custodian has completed the process, a securities account will be opened on the CSD platform on behalf of the investor.”
TS’ will also be responsible for attending to shareholders queries, administering annual and extra ordinary general meeting registry processes and corporate actions such as dividend pay-outs, share splits, rights issues, consolidations and mergers. Analysts said last week the system will bring efficiency into the local capital market.
“It will be business as usual for all parties, only the clearing and settlement side has changed. The new system has streamlined the role of stock brokers,” said FBC Securities back office manager Mr Norman Chirima.
However, with automation, there are fears small time investors may feel short-changed by paying more for transacting on the ZSE.By opening the mandatory custodial accounts that will house the new electronic share certificates, minorities will incur an extra cost that may force them out of the market, analysts have said. But, according to a public notice issued by CDC last week, opening a CSD account and dematerialisation of shares shall be done for free. Custodians will however charge custodial fees for safe keeping and trades processing.
“The public should enquire with respective custodians on actual custodial fees. Normal bank charges shall also be borne by the investors during settlement of trades,” said CDC. The custodians include CBZ Custodial Services, Old Mutual Custodial Services, ZB Custodial services, Stanbic Investor Services and Standard Chartered Custodial Services.
