BUUMBA CHIMBULU writes
FOUR institutions have been named as authorised brokers for foreign exchange trading by the Bank of Zambia (BoZ) to create more sanity in the market.
The decision which took place on 12 August 2020, is in line with the Central Bank’s revised trading guidelines.
In a memo to commercial banks, BoZ office of the Deputy Governor Operations named ICAP Broking Services Ltd, GFI Africa Money Market Brokers Ltd, Emerging Markets New York and Continental Capital as authorised brokers.
The Central Bank will on an annual basis review the brokers list.
The Zambian market had for a long time operated without clear cut approval process for approving brokers.
Traders were still able to trade but by reaching out to fellow dealers in the system.
According to the Kwacha Arbitrageur, Zambia had undergone a significant evolution in its foreign exchange trading framework this year.
This, explained the Arbitrageur, ranged from a ‘crawling peg’ to curb volatile swings earlier in the year to ‘dollarisation’ of mining taxes to ‘making traders personally liable for steep swings’ to then naming of currency brokers.
“It was forecast by some analysts that the BoZ could have been graduating onto a managed float earlier while this has not been the case.
“Zambia remains one of Africa’s most liquid foreign exchange floating regimes second to South Africa according to the AFMIndex which last rated it at 61/100,” said the Arbitrageur.
These measures, the Arbitrageur said, had placed in response to swings in exchange rate which were observed in the year prompting a revision in its Interbank Foreign Exchange Market (IFEM) framework to reign in on volatility.
“It may appear prima facie as though trading through authorised brokers may deepen visibility but some traders believe the central bank did not fully comprehend the full role of brokers in the market at a time when the Kwacha slide persisted earlier in the year,” the Arbitrageur said.