Steps to start investing in the Zimbabwe Stock Exchange
Learning how to invest is an important skill, so developing a knowledge base that will help you understand how to invest and determine what might be a suitable investment for you is crucial for every investor.
Investing in the ZSE
Before the introduction of online trading platforms, investors only traded on ZSE through a registered stockbroker. With advances in technology, investors now have two channels when investing in the ZSE. One can trade through a stockbroker or through online platforms like ZSE Direct.
A stockbroker is a market professional who buys and sells securities on behalf of clients on an exchange in exchange for a brokerage commission. Licensed by SECZ and member of ZSE (www.zsetraining.co.zw/glossary/stockbroker/)
Why do you need a stockbroker
One of the most important questions asked is why one needs a stockbroker when trading on the ZSE. The ZSE provides a secure and regulated trading environment where only registered ZSE market participants have direct access to the trading securities market. Registered ZSE market participants generally act as a broker-dealer, executing buy and sell transactions on behalf of investors in exchange for a service (brokerage) fee.
An investor can choose to make their own decisions about what and when to buy and sell or seek professional advice or adopt both strategies.
Investing on the ZSE through a stockbroker
To start investing in the ZSE through a stockbroker, follow the steps below;
1. Open a trading account
Virtually more than one account is required for an investor to invest in the stock market. Grouped under the term “trading account” includes the following:
A stock trading account (with one of the current 20 brokerage firms https://www.zse.co.zw/stock-brokers/ )
A Central Securities Depository (CSD) account
A depository account (which may be provided by your broker if they offer accounts controlled by a broker or by one of the independent depository companies)
2. Submit Know Your Client (KYC) documents
A trading account is opened by completing and signing account opening forms with your preferred brokerage firm and submitting the following KYC documents;
2.a) For individuals
Copy of ID (passport for foreign investors)
Proof of residence (electricity bill within three months of the date of processing in the name of the account holder or accompanied by an affidavit from the lessor, in the case of a rental); and 2 passport size photos.
2.b) For companies/trusts/domains/NGOs
List of Directors/Trustees (CR14 etc.)
Head office contact details (CR6)
KYC of administrators/trustees (as for individuals)
3. Deposit investment funds with your custodian or stockbroker*
If your broker-dealer acts as your custodian (dealer-controlled account), you deposit funds into your broker-dealer trust account and if you have a custodian independent of your broker-dealer, you deposit the funds in the custodian’s account.
NB* – funds should only be deposited when you intend to buy on the exchange.
4. Place your orders with your stockbroker
Once you have made the decision to buy or sell securities on the stock exchange, you should contact your broker and let them know your desire, emphasizing the type, quantity and price limit (if any) of the securities. to negotiate.
Other information such as the validity period of the order is also required.
Your stockbroker then sends your request to the ZSE Automated Trading System (ATS), where it is entered into a central order book along with all other requests to buy or sell stocks.
If the price you want to pay matches a seller at the same price, the transaction takes place and you will become the owner of the shares you have decided to buy.
The information provided in this article is for educational purposes and does not constitute financial advice. You should obtain independent advice from a registered investment dealer or financial advisor before making any financial decision.