Stage set for CSD launch by BSE

KABO MOKGOABONE
Staff Writer | Tuesday April 29, 2008 00:00

The move is meant to achieve the objectives of the Committee of the SADC Stock Exchange (COSSE) to harmonise regional stock market trading. The CSD forms part of the road map by Hiran Mendis, the Sri Lankan who was roped in by government to help put the BSE on the world map after the departure of Dr Tebogo Matome in 2006 as chief executive officer.

 

BSE market development manager, Lame Masire said the project, which cost government P5 million will be operational by May 22. The CSD was first demonstrated in 2006 to stakeholders who included brokers and journalists by BSE commissioned consultants CDS Co. of Mauritius and Millennium IT of Sri Lanka, who later won the tender to install the system.

 

It is believed the system will increase liquidity at the stock exchange. It is already successful in other countries like Mauritius. A CSD functions as an electronic entry system, which once set up, will allow brokers to place orders online through an interface created between the computers at their offices and those at the BSE.

 

Stock exchanges around the world are introducing the electronic system to replace the physical handling of shares, which has its own risks.

 

CSD will perform several functions like the processing of certificates, deposits, withdrawals, transfer of securities between accounts and record trading.

 

It will generate settlement reports for participants, settlement banks and clearing banks.

 

It will transfer securities between accounts of buyers and sellers. Experts say the advantages of installing a CSD include a reduction of the risk element inherent in the manual clearing and settlement and improves efficiency. It will help to attract more foreign investors since the settlement and clearing standards used will be internationally recognised.

 

In the manual BSE system, there is an exchange of cheques and certificates, which is risky and inefficient. The cheques could be misplaced, stolen or lost and this can affect the market.

 

Stock broking firms and custodian banks using the system will be required to meet certain requirements and must have access to CDS system from their offices.

 

Participants will be expected to open and keep securities accounts for their clients in the CDS. Under the current system, when people buy shares, they have to approach a stockbroker and wait for some days before they get a share certificate from the transfer secretaries.

 

The present system is risky and is prone to fraud, insider trading and transfer cancellations. Brokerages that will participate in the CDS include Motswedi Securities, Capital Securities and Stockbrokers Botswana.