Law on electronic trading of bonds ready

By James Anyanzwa

Regulations governing electronic trading of bonds is ready.

The Central Depository and Settlement Corporation (CDSC), in a circular to agents, said the relevant law for the proposed trading platform was in place.

It includes rules governing the immobilisation and electronic settlement of transactions in debt securities.

The chief executive Rose Mambo said she expects outstanding issues to be finalised by October.

"This is at an advanced stage and we are expecting approval of the rules soon," said Mambo.

Mambo said the CDSC will also seek to increase the Central Depository Agents (CDAs)’ contributions to the Guarantee Fund to address the settlement risk of settling debt securities.

The CDAs act as a link between the investing public and the corporation, which carries out clearing and settlement services.

Investor confidence

Mambo said the Guarantee Fund is underfunded without taking into account the exponential growth of the market over the last five to seven years.

She said mitigation of settlement risk would enhance investor confidence to participate in the secondary market for debt securities.

Mambo said existing CDS accountholders would not be required to open new accounts since its structure allows holding of all types of securities (equity and debt) in a single account.

CDSC has been working on customising the full debt functionality, which includes depository functions, electronic clearing and settlement functions, and reporting and administrative functions.