Legislation slows NSX, BoN depository company
The CSD is crucial to fully open up the Namibian market, not only to local companies, but also international investors.
Ogone Tlhage - The planned implementation of a central securities depository by the Namibia Stock Exchange (NSX) and the Bank of Namibia (BoN) has been delayed owing to the lack of a regulatory framework bourse, NSX CEO Tiaan Bazuin has told Market Watch.
A central securities depository (CSD) is a company that owns technology to securely hold equities, bonds and money market securities in electronic form so that buyers and sellers can exchange ownership of these securities once they are successfully traded.
The CSD was expected to go live in the latter part of 2017.
However, the Namibia Financial Institutions Supervisory Authority (Namfisa) found the current legislation lacking, which in turn has prompted both stakeholders to write rules for the anticipated future operations of the depository.
“We are still partnering with the Bank of Namibia, and as the Central Securities Depository will be regulated under the Financial Institutions Market Bill, the much-anticipated legislation will be used as licensing regime. The Namibia Financial Institutions Supervisory Authority determined the CSD cannot be licensed under the existing legislation,” he said when asked to provide an update on the matter.
Bazuin did not give an indication of when the rules would be completed.
“We are in the process of writing the rules for the CSD, which will be shared with market participants soon,” he said.
Advantages
In an interview with JSE Magazine, Bazuin highlighted the potential advantages a depository company holds and why the timing of its planned implementation was opportune.
“Ten years ago it may well have been unaffordable to implement a CSD or a trading system for bonds and derivatives, but now it is. That’s why we are in a position to expand our products and services,” Bazuin said.
The depository will also pave the way for the trading of derivatives on the NSX, he said.
“As soon as our central securities depository is licensed and live, we intend to dematerialise all Namibian securities, after which derivatives are planned for the market. The obvious products to start with would be local forex and other hedging products. Thereafter we should be in a position to launch products based on what the markets then want to see,” Bazuin said.
According to him, the CSD will allow international buyers to take part in the local market.
“Revising the current cost structures in the market and establishing an electronic trading option as an alternative to the current over-the-counter methods with reporting obligations will create a reliable yield curve that will further deepen the market,” he told the same publication.
NSX chairman David Nuyoma also highlighted the importance of the CSD in the 2016 annual report of the local bourse.
“Many more steps are required to truly open our markets, not least of which are the formalisation of our bond market and setting up a Central Securities Depository (CSD) for the trading in electronic scrip.
“We hope by developing the market in these projects, more Namibian companies will open their shareholder base and come to market by listing. As in most African markets, ours is plagued by small size and illiquidity and can only change by having more choice and depth,” Nuyoma said.
He also stressed the importance of the CSD to lure more international interest. This would increase the “demand even more, not only for shares, but specifically on the bond market”, Nuyoma said.
A central securities depository (CSD) is a company that owns technology to securely hold equities, bonds and money market securities in electronic form so that buyers and sellers can exchange ownership of these securities once they are successfully traded.
The CSD was expected to go live in the latter part of 2017.
However, the Namibia Financial Institutions Supervisory Authority (Namfisa) found the current legislation lacking, which in turn has prompted both stakeholders to write rules for the anticipated future operations of the depository.
“We are still partnering with the Bank of Namibia, and as the Central Securities Depository will be regulated under the Financial Institutions Market Bill, the much-anticipated legislation will be used as licensing regime. The Namibia Financial Institutions Supervisory Authority determined the CSD cannot be licensed under the existing legislation,” he said when asked to provide an update on the matter.
Bazuin did not give an indication of when the rules would be completed.
“We are in the process of writing the rules for the CSD, which will be shared with market participants soon,” he said.
Advantages
In an interview with JSE Magazine, Bazuin highlighted the potential advantages a depository company holds and why the timing of its planned implementation was opportune.
“Ten years ago it may well have been unaffordable to implement a CSD or a trading system for bonds and derivatives, but now it is. That’s why we are in a position to expand our products and services,” Bazuin said.
The depository will also pave the way for the trading of derivatives on the NSX, he said.
“As soon as our central securities depository is licensed and live, we intend to dematerialise all Namibian securities, after which derivatives are planned for the market. The obvious products to start with would be local forex and other hedging products. Thereafter we should be in a position to launch products based on what the markets then want to see,” Bazuin said.
According to him, the CSD will allow international buyers to take part in the local market.
“Revising the current cost structures in the market and establishing an electronic trading option as an alternative to the current over-the-counter methods with reporting obligations will create a reliable yield curve that will further deepen the market,” he told the same publication.
NSX chairman David Nuyoma also highlighted the importance of the CSD in the 2016 annual report of the local bourse.
“Many more steps are required to truly open our markets, not least of which are the formalisation of our bond market and setting up a Central Securities Depository (CSD) for the trading in electronic scrip.
“We hope by developing the market in these projects, more Namibian companies will open their shareholder base and come to market by listing. As in most African markets, ours is plagued by small size and illiquidity and can only change by having more choice and depth,” Nuyoma said.
He also stressed the importance of the CSD to lure more international interest. This would increase the “demand even more, not only for shares, but specifically on the bond market”, Nuyoma said.
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