Finance minister Tendai Biti has ordered capital market players to speed up the process of setting up an automated trading system (ATS) and central securities depository (CSD) amid indications that Treasury was frustrated with the slow pace of reforms.
Sources said Biti on Monday summoned the Zimbabwe Stock Exchange (ZSE) board, management and committee as well as the Securities Commission of Zimbabwe to his offices.
He reportedly instructed the parties involved in the automation of the exchange, to immediately address the paperwork required in setting a historic CSD.
A CSD is an entity that holds and administers securities and enables transactions to be processed by book entry.
The ZSE currently utilises a call-over system to execute trade.
Critics say paper-based operations of the exchange were fraught with inherent risks.
Clearance and settlement is done between stockbrokers with payment against delivery of physical scrip on a T+7 calendar days basis.
The sources said this was the first time this year that all market players have met the Finance minister over the issue.
“Minister Biti is currently unhappy with the progress and he wants to give the nation a clearer picture of automation process when he presents his Mid-Term Budget review next month.
“So essentially the parties were instructed to speed up the process,” said a source close to the developments.
ZSE chairperson Eve Gadzikwa confirmed meeting the Finance minister.
“We were tasked to come up with timelines for the CSD, ATS and demutulaisation of the exchange and we are expected to give the minister that roadmap within a week,” Gadzikwa said.
“There was consensus on the issues and we will continue with our efforts to automate the exchange.”
Plans to set the CSD by June last year hit a snag after Biti put the proposal on hold and referred the matter to Cabinet.
The minister then announced that quasi-government institutions would own 51% of the CSD firm while private players, including the ZSE, would own the remaining stake.
This suspension came after the ZSE, which was then seeking control of the CSD, was approached by Chengetedzai Depository Company (Pvt) Ltd — a company that had initially won the tender to run the system — with a view to court the exchange as an equity partner.
Experts say delays in automating the exchange have exposed the ZSE to manipulation, which in turn has affected the integrity and transparency of the bourse.
The ZSE which is currently reeling from low market confidence on the back of perceived liquidity and counterpart risk, low standards of corporate governance, vulnerability to market shocks and lack of competitiveness in the local market, among other factors sees automation and demutualisation as a means to unlock the potential of the lacklustre exchange.
Last year, ZSE stockbrokers proposed a new law on demutualisation of the exchange, as the capital-starved bourse pushed for listing.
Demutualisation, according to the paper, entails a change in the legal status of a stock exchange from a mutual association with one-vote per member guided by consensus based decision-making, to a company limited by shares with one vote per share.
This process would also result in the ZSE becoming a for-profit firm in a competitive financial market environment.