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The Financial Securities Exchange (FINSEC) will today launch the Derivatives Market to allow diversification of capital market products and trading, allowing market players to make more informed investment decisions.
This follows the recent gazetting of Statutory Instrument 70 of 2022 as well as approval of the Derivatives Rules earlier.
Escrow Group CEO Collen Tapfumanei told Nhau/Indaba that they were excited to launch the inaugural project in Zimbabwe which is vital to further economic development.
“We are indeed excited to be launching for the first time in Zimbabwe Exchange traded derivatives market place that will be operated by the Financial Securities Exchange (FINSEC).
“The markets are very important for the economic development of the country for the depth of the market, transparency of price discovery and liquidity of markets which have a ripple effect on the economy. “As an example, if you look at agriculture, farmers need to have a market for their produce which will be ultra in six months or ten months time. So with the derivatives, farmers are able to contract and have buyers for their produce and know about their prices in future and therefore stimulate production, ” said Tapfumanei.
He said that is one of the biggest uses of derivatives where the production sector have predictability in terms of the buyers while buyers have predictability in terms of the production of the commodity.
“Prices are agreed in advance through derivative instruments. Derivatives sound like they are complicated but this is where we come in as FINSEC with capabilities to simplify concepts that are generally viewed as complicated.”
The FINSEC Derivatives Market which is fully automated, complete with direct integration of contract writing, trading, clearing, custody, margin management and settlement facilities to ensure efficiency, security and transparency in the entire processes will be available for Stock Futures, Stock Options and Stock Indices.
Detailed Derivatives Market guidelines covering pricing and underlying securities selection criteria are also available on the exchange website.
Before its launch FINSEC embarked on a market capacity building exercise through holding masterclasses for market participants as well as potential investors to prepare them for the Derivatives Market.
This will culminate into a six months rigorous pilot window which will be opened after it’s launch to allow the participants and investors to get acquainted with the product.
“We are opening a public window in which we will all learn, the public and investors. Everyone will learn on how they can utilise the derivates. I will encourage everyone to try and take part in a managed way and we will limit positions and risks but just give the platform for people to leran for the next six months,” said Tapfumanei.
Beyond the first six months, FINSEC will lift the limits and add more underlying assets (including commodities) to allow a fully-fledged Derivatives Market.
Maximum position limits of ZWL 3 million for institutional investors and ZWL 100 000 for retail investors have been set.
Stock Futures and Stock Options – Underlying securities will be selected based on minimum liquidity and volatility thresholds as determined by the exchange.
Listed stocks that have so far met this criterion are Simbisa Holdings Limited; Econet Wireless Limited; Innscor Limited; Delta Corporation Limited and Ecocash Holdings. Nhau/Indaba
