THE Securities and Exchange Commission of Zimbabwe (SecZim) has expressed concern over the growing popularity of private trading platforms, which are siphoning liquidity away from the formal market.
SecZim chief executive officer, Anymore Taruvinga told businessdigest that the private platforms operate with minimal regulatory oversight, facilitating bilateral transactions between individuals or brokers, potentially undermining market integrity and investor protection.
“Transactions are thus made with limited knowledge of trades recently negotiated elsewhere in the market. Lessons from the 2008/9 financial crisis demonstrate that private platforms lack transparency which is critical for informed decision-making and effective market oversight,” he said.
“Private platforms also divert liquidity from the official market thereby discouraging proper price discovery and threatening financial stability.”
The SecZim chief said investors who participate in such platforms are exposed to risks that cannot be covered by conventional means such as the Investor Protection Fund.
They also suffer financial losses which indirectly affect confidence even in regulated platforms, he noted.
During the inaugural capital markets conference that took place recently in Nyanga, Taruvinga said the flip side was also the fragmentation of markets.
“There is also disintermediation, which I have talked about. How do you regulate a robo-advisor, for example? If they advise someone to make a loss, how do you penalise the computer as a regulator?” he questioned.
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This development comes as the regulator has lamented the void in investment banking services, which typically bridge the gap between capital providers, those in need of funding, and experts who can structure complex transactions, thereby facilitating growth and development in the market.
“Their absence on the market has seen the market registering a dry spell in listing, several highly undersubscribed issuances, and the absence of sophisticated products on the market,” he said.
“When you turn to the NDS 1 (National Development Strategy 1) pillars including environmental protection, economic growth and stability, among others, the macroeconomic objectives for the five-year period of the strategy, these must be matched with the requisite debt or equity instruments to deliver sustainable growth and real impact on the lives of all citizens.”
Likewise, Taruvinga said the development of the debt market would add to the flair of securities products available for investors and also provide a sustainable income source for intermediaries.
He highlighted that it would help the government to raise funds for basic infrastructural services, including energy, transport, water and sewer reticulation, housing, health, education, information and communication technology.
In the 1980s to mid-1990s, Taruvinga said Zimbabwe had a robust fixed-income market with significant debt issuances by the government and local authorities with tenors of up to 30 years after which it became dormant with a few listings including some debentures, medium term notes and few corporate bonds.
