The Sunday Mail
Business Reporter
Chengetedzai Depository Company (CDC) has enjoyed the first mover advantage in the Central Securities Depository (CSD) space since 2014, after winning a public Securities and Exchange Commission of Zimbabwe (SECZim) tender awarded to them on December 27, 2010.
CDC was born out of the need to do away with the then old-fashioned way of settling trades on the Zimbabwe Stock Exchange (ZSE) where physical certificates had to be exchanged after a trade had been completed. The shift from the manual way of settling trades to electronic is a process called dematerialisation (demat) which offers more security, increased speed, and more accuracy in record keeping.
Due to such efficiency, the ZSE improved settlements days from T + 7 to T + 3 and more recently new trading platforms like ZSEDirect now has a feature where sellers can have their bank accounts credited on the very day of selling.
Then enters the ZSE . . .
A year after Chengetedzai resumed its operations, the ZSE expressed its interest in 2015 to acquire a license to also operate a CSD. They were given the greenlight by SECZim. Four years down the line in November of 2019, the ZSE approached Chengetedzai in a bid to partner or acquire full shareholding in CDC.
The proposal was rejected by Chengetedzai.
Chengetedzai shareholding is dominated by National Social Security Authority (NSSA), CBZ Holdings, ZB Financial Holdings and ZSE which has approximately 13 percent shareholding, we are told.
It is intriguing to have the ZSE fighting an institution in which it has a stake in.
The ZSE went on to establish and operate its custodial outfit which commenced on October 1, 2021. Already ten issuers have migrated from Chengetedzai to ZSE Depository.
Listed companies that have migrated so far are Innscor, Simbisa, Axia, Dairibord, Seed Co, Art, CAFCA, FBC, Truworths and Masimba. The recently launched Morgan&Co Multi-Sector ETF chose ZSE as its custodian as well. The migrations caused some ugly fights between the two entities resulting in litigation.
There were concerns from some market players that the ZSE arm-twisted the issuers to migrate to their CSD but the ZSE, being one of the oldest stock exchanges in Africa, market watchers argued that the exchange has managed to establish a working relationship with most issuers.
Using its sway in the market, the ZSE implemented rebates starting November 1, 2021 meant to reduce costs on issuers who opted to use their depository. The move was, however, stopped by the courts. It was in the media as well that the ZSE had in December 2021 added it as a listing requirement to have issuers registered with their depository. The Competition and Tariffs Commission of Zimbabwe (CTC) condemned ZSE’s attempt as they highlighted that they do not care about anything, but “fair competition”.
Is it common to have two or more CSDs on one exchange?
Depending on the country’s market depth, it is very possible to have two or more CSDs in an economy. According to an IMF Working Paper WP/18/66 which was addressing the organisation of CSDs in developing markets, the following table can help us speak to the above question:
The IMF encouraged developing markets to consider efficiency and safety when establishing CSDs backed by key cornerstones namely; sound legal and regulatory framework, effective supervision and oversight, and co-ordination and cooperation.
