THE Zimbabwe Stock Exchange has come up with proposed debt market conventions meant to standardise trading of fixed income securities on the stock exchange.
The ZSE is working on resuscitating the bond market to improve resource mobilisation for developmental projects. It is now soliciting stakeholder input on the proposed conventions.
A draft document seen by the Herald Business provides conventions and formulas to be used by market participants for the calculation of prices, interest payments and yields on securities traded on the Zimbabwe Stock Exchange Fixed Income Market.
“The objective…is to provide market participants with a single comprehensive guide to market conventions commonly used in the fixed income market,” read part of the document.
“In time we hope this guide facilitates the continued use of uniform practices among ZSE market participants, and further enhances the efficiency and attractiveness of Zimbabwe’s capital markets.”
The document also provides a description of the securities with brief explanations of specific conventions and elements of the valuation formulas.
The instruments include fixed coupon bonds, a semi-annual coupon bonds which will form the overwhelming standard for borrowing in the Zimbabwean capital market.
The bond will have a fixed annual coupon rate of interest in two equal semi-annual payments.
Other bonds pay coupons on a quarterly or monthly basis, but are rare in the Zimbabwean context.
Amortising securities will have fixed payment and amortisation schedules, money market discount securities will include treasury bills, bankers’ acceptances, bearer deposit notes and commercial paper while inflation-linked bonds – have a coupon linked to the CPI.
A minimum tradable lot size is $10,000.
The bond market plays a pivotal role in the mobilisation of resources for long term capital projects.
Currently, there is large scope for trading bonds and Treasury bills in the market, given that Government and private players are actively participating in the market.
The Securities and Exchange Commission of Zimbabwe has developed guidelines to be used to regulate the market, and have circulated them to stakeholders for input, before they are gazetted in the first quarter of this year.