CSD misses deadline

Business Reporter
THE Central Securities Depository missed its November 2013 deadline to start operations amid an outcry by Zimbabwe Stock Exchange participants that the charges could make transactions expensive. The Zimbabwe Stock Exchange’s first ever securities settlement system was initially scheduled to start operating in October, but the target date was moved to November and now to early next year as a few critical logistical issues have not yet been finalised.

A schedule of charges based on a draft pricing structure by Chengetedza Depository Company, the local firm charged with setting up the CSD, show that many fragmented charges may apply on various transactions, corporate actions, participants and issuers.

From the schedule, there are a total of 35 market or scrip related transactions that will be liable to various forms of levies or fees in what stakeholders feel could increase the cost of transacting.

However, market sources yesterday said some of the proposed charges or fees, sent out to the market as a draft, have since been revised downwards and these include broker application fees from US$2 000 to US$500, annual fees US$6 000 to US$500 and custodian fees.

Contacted for comment Chengetedza Depository Company chief executive Mr Campbell Musiwa said the whole issue of the CSD fees was a matter that was still under discussions.

“It is difficult for me to comment on something still under discussion, but both the ZSE and SECZ were consulted and are of the view that the cost of transactions should be reasonable, but we are getting close to achieving finality on the issue (of fees),” Mr Musiwa said.

He added that all market participants that include stock brokers, transfer secretaries and custodians had made representations to the Securities and Exchange Commission of Zimbabwe and SECZ, as the regulator, would make a determination on the fees and rates proposal.

If Chengetedza’s draft pricing structure is approved unchanged, brokers and custodians would pay US$2 000 for application and US$6 000 annual fees, issuers US$1 000 for admission, US$500 annual fees per shareholder and 0,3 percent CSD levy per leg.

Off market transactions would be subject to 0,5 percent levies for different beneficiaries, 0,3 percent each for donations and inheritance, US$2 portfolio movement, US$75 for account transfer, 1 percent for pledges based on market value and 1 percent for locking shares (max US$50 000).

In terms of corporate actions, initial public offering would be levied 2 percent based on amount raised (min US$25 000), private placement and allotment 1 percent per transaction and US$1,50 each for rights issue, splits, consolidation, bonus issue, share buyback and options.

In addition, a similar amount will be charged to corporate mergers and acquisitions per shareholder with the minimum figure also pegged at US$3 000 per transaction while 1 percent would be levied for cash dividend with the minimum transaction value set at US$5 000.

Value added services such as CSD ad hoc and issuer reports will attract US$5 per report requested, US$50 for bi-annual reports per issuer or participant US$50 for retrieval of each achieved report.

Furthermore, delayed settlement would be levied at 2 percent daily per value of trade unmatched deal with a minimum of US$100 and maximum of US$500 with US$1 000 charged for trade failure.

Settlement failure will be levied at 2 percent for defaulting broker, 75 percent payable to the guarantee fund and 25 percent would be payable to the aggrieved broker. A fee of US$100 would be for irreconcilable CSD accounts by end of day and US$300 CSD debit account by end of day.

The CSD platform will service various exchanges. CMA’s DEPO/X solution will connect Chengetedza Depository Company to 22 participants, including 13 stockbrokers, four custodians, three transfer secretaries and a settlement bank as well as the Zimbabwe Stock Exchange.

The CSD is expected to improve financial markets in the country and increase liquidity and efficiency at the bourse.

Among other functions the system will process share certificates, conduct deposits and withdrawal, transfer securities between accounts and record trades and in the process minimises the risks associated with physical share certificates.

It will also generate settlement reports for participants, settlement banks and clearing banks and transfer securities between accounts of buyers and sellers after clearing banks confirm successful transfer of funds.