The Financial Securities Exchange Limited (FINSEC), an alternative trading platform, has set up private and derivatives markets to provide further investment options to investors.
The FINSEC private market is a private funding platform for businesses at every stage of their development. This follows overwhelming demand for private debt and private equity funding on the exchange’s Growth Enterprise Market (GEM Portal), which was launched in 2019.
This also comes after the Government recently announced the applicable charges for derivatives under Statutory Instrument 70 of 2022.
“There are hundreds of thousands of registered companies in need of capitalisation and in equal measure there are as many investors willing to pour capital but have limited options to invest into the capital markets,” said FINSEC chief executive officer, Collen Tapfumaneyi.
Mr Tapfumaneyi added that the private market platform would provide debt financing, equity financing, initial public offering (IPO), pre-IPO, price and value discovery and invoice discounting investment options to investors.
The GEM portal will assist in screening, regulation and discovery of market value.
So far the portal has received 145 applications and about US$7,5 million has already been secured for capitalising qualifying applicants following pledges by 5 financiers.
Meanwhile, indications are that the derivatives market will go live on the portal on June 1, focusing mainly on minimising risks especially in productive sectors such as farming and mining.
Derivatives are financial instruments that derive their value from an underlying asset such as equities, hard or soft commodities or from a group of assets. The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates and market indexes.
According to Investopedia, the common derivatives include options, future contracts, forwards and swaps.
FINSEC started working on introducing a derivatives market in phases that involved preparing the market for the new product through holding master classes with market participants as well as potential investors to equip them on how derivatives work, potential risks as well as how investors can derive value from such investments.
“These instruments will assist producers of commodities to minimise risks at the same time set pre-determined prices for their produce which will be settled by buyers under contract once tenure of contract matures,” said Mr Tapfumaneyi.
Last year, FINSEC also launched an agriculture commodities exchange, the Zimbabwe Mercantile Exchange (ZMX) which allows farmers to trade about 18 commodities.
While financial inclusion in capital markets has remained very low in Zimbabwe, operators of exchanges have been working on products and platforms that increase retail investors participation such as C-TRADE