A handful of listed companies have started migrating to the new Zimbabwe Stock Exchange (ZSE) Depository for settlement of their shares effective beginning of next month, after the regulator Securities and Exchange Commission of Zimbabwe (SECZ) allowed competition in the Depository field.
Since there has been licensing of multiple central securities depositories (CSDs), SECZ aims to ensure a smooth migration of deposited securities from one CSD to another, according to its recent directive.
A CSD is a facility that holds and administers securities as well as enabling transactions to be processed by means of book entry.
However, the directive was issued in line with the SECZ’s mandate of regulating the capital markets with the objectives of providing high levels of investor protection, encouraging free, fair and orderly capital markets as well as reduction of systemic risks particularly in the trading, clearing and settlement ecosystem.
ZSE Depository started operating at the beginning of this month after being granted approval by the SECZ. The new depository has managed to gain traction, in what market watchers say that the local bourse “is using every tool possible to punish them (Chengetedzai Depository Company) for not selling.”
Firms making the migration list includes clothing retailer Truworths and ART which advised stakeholders that settlement of its shares listed on the local bourse will be done through the ZSE Depository with effect from 1 November 2021.
“Stakeholders are advised that they can obtain their new CSD account numbers through their stockbroker or custodian,” reads the notice.
The CSDs shall allow for fair, open and non-discriminatory access to its services based on reasonable risk-related access requirements, according to SECZ.
At the beginning of this month, Seed Co Limited, the country’s largest seed maker, told stakeholders that settlement for Seed Co shares listed on the ZSE will be done through the ZSE Depository, with effect from 1 November 2021. It advised stakeholders that there will be no changes to their custodial and trading relationships.
On the same note, quick service restaurant provider Simbisa Brands also said its shares listed on the local bourse will be processed by the ZSE Depository effective beginning of next month.
One of the country’s CSD is Chengetedzai Depository Company (CDC) which opened its doors in September 2014. But, the company is poised to be the causality of the migration.
In a press statement dated 2 October 2021, clarified the implications on settlement and custodian of shares. Chengetedzai Depository noted that no securities depositor or beneficial owner will be forced to change depositories. This comes as the company has binding contracts at three levels that is with issuers, participants and also with the depositors who currently have shares deposited with CDC.
“Securities depositors or investors who may choose to change Depositories and move to ZSE Depository will be free to do so but they will be expected to abide by the contracts signed with the CDC as well as the CSD rules, business process flows and the Securities and Exchange Act (Chapter 24:25) requirements,” stated CDC.
The participating issuer shall publish a notice to shareholders on the migration to the new depository, according to SECZ directive. Also noted that the notice shall also specify the cut-off date to allow for all transfers, settlements including dematerialisation and rematerialisation to settle on the “effective date” being the migration date.
“Trades that settle on CDC Limited will now settle on the ZSE depository for those who have chosen to move from Chengetedzai. This has no effect on Investors but Chengetedzai has effectively lost market share,” said one stockbroker.
As at September 30, 2021, the cumulative number of accounts opened on the Chengetedza CSD was 36 127. Local investors accounted for 95 percent of all accounts opened on the CSD – Harare