Role of stockbroker on the FINSEC ATP
THERE is an intricacy to dealing on the capital market. Investors, whether sellers wishing to exit an investment or prospective buyers taking an opportunity to invest in what they deem a profitable security, will not come directly to the market.
These parties (buyers and sellers) have to go through an intermediary known as a stockbroker or a securities dealer. Dealers are adequately qualified to guide investors who wish to transact in securities.
A stockbroker can be a firm or an individual licensed as such by the Securities and Exchange Commission of Zimbabwe (SECZ). Normally, a brokerage firm comprises of two or more individuals licensed as stockbrokers. FINSEC allows both brokerage firms as well as licensed individuals to trade on the Alternative Trading Platform (ATP).
Stockbrokers play four critical roles on the FINSEC Alternative Trading Platform as Dealers, Market Makers, Sponsors and Transaction Agents.
As Dealers, stockbrokers act as sales persons who are keen on matching buyers and sellers whilst making a commission on both sides. In this instance, the stockbroker performs a service for the investors. This means that the stockbroker will lookout for the buyers and source for the sellers, each time ensuring the best price is obtained for the clients.
Securities dealers are recognised by FINSEC as official trading participants on the securities exchange.
The stockbrokers have special training, licensing and rights to post orders on the FINSEC Automated Trading System (ATS). The ATS is the FINSEC technology that connects all securities dealers virtually and in real-time thereby creating a wide and all-encompassing securities market.
By virtue of their licensing, securities dealers also qualify for admission on the FINSEC ATP as Market Makers or liquidity partners. In this role, the dealers guarantee liquidity in their chosen securities listed on FINSEC. In simple words, Market Makers have an obligation, to the extent of their contract, to ensure that there is supply to meet every purchase and that there is demand to meet every sell. To make business sense out of this role, FINSEC allows Market Makers to buy at a discount and sell at a premium and make a profit out of the spread.
The FINSEC Issuer Admission Rules require prospective Issuers to appoint a Financial Investment Advisor licensed as such, by SECZ. Securities dealers are equally allowed to sponsor an application for listing, as sponsoring brokers.
There are various types of transactions that normally occur on a securities exchange including but not limited to Initial Public Offers (IPOs), private placements and rights issues. In such transactions, where issuers seek to raise capital in exchange for securities, the listed companies may find it expedient to distribute their securities through licensed securities dealers. In this respect the dealers again assume the role of sales persons who will merchandise the issuer’s securities and earn a commission.
For more details on the rules that apply to the various roles admissible for securities dealers on the FINSEC ATP, kindly visit the FINSEC website and download the FINSEC Membership and Business Conduct Rules. The website also provides details of participant stockbrokers on the FINSEC ATP.
The Financial Securities Exchange (FINSEC) is a Zimbabwe registered securities exchange and a member of the Escrow Group.
The Escrow Group has interests in the financial services and technology sectors. Corpserve Registrars and Escrow Systems are the other members of the group.
Stockbrokers play four critical roles on the FINSEC Alternative Trading Platform as dealers, market makers, sponsors and transaction agents