There is a term that is being used to describe the current influx of small retail investors on the Zimbabwean Stock Exchange. The rise of the retail investor owes some of its existence to the establishment of two direct access platforms for Zimbabwe Stock Exchange investors and those are Ctrade and ZSE Direct. I have been asked on occasion which to choose between the two platforms and thought it a good idea to put together something that explores the two platforms to help people make a decision. I will compare the two based on the registration process, transacting options, movement of money, speed, information, costs, products available and finally accessibility.
First and foremost let’s compare the registration process as this is the first thing you will encounter. Both work on a purely online registration process which is a blessing and dare I say a basic human right in 2021. You will need to provide identification and a bank account in both cases. Ctrade however provides a quicker registration process because they do not require you to register with a broker immediately, you will nominate the broker on a per transaction basis. The registration process with the broker will cost you a few more days with ZSE Direct.
When it comes to transacting, the actual buying and selling of securities on the platforms there are a few differences between the two. Let’s look at the “time in force” options which simply means how long orders can last. ZSE Direct provides the Day Order (last until the end of the day) and Good Till Cancelled (which lasts until you cancel it). In addition to these two time in force options, Ctrade also offers Good till day (which can be set to expire on a certain day in the future if not matched) and the incredibly useful Immediate/Cancel order which cancels the order if a match cannot be found within 5 minutes. Time in force matters because when buying you pledge the money (it is not available to use for anything else) and when you sell you pledge the securities (they are not available for use. So if you see a better deal after making a day order your money or securities will only become available the next day.
Movement of money
This refers to the movement of your money in and out of the ZSE. ZSE Direct works on a direct system that uses your bank account. This presents one particular problem that has caught many unaware. Moving money between banks costs money and upon disposing of securities, the money is moved to your bank account in a “forced withdrawal” which attracts bank fees. Ctrade uses a trading account that holds your money. In the disposal of securities the money is held in your trading account, available for same-day usage and does not attract any bank fees. Bank fees do apply to withdrawals but these apply when initiated by the user.
We touched on this when talking about the movement of money but it is still worth looking at settlement in its own right. The two systems are of course based in the same ecosystem and so certain things are unavoidable. Settlement of transactions in the Zimbabwean system happens on a T+3 days basis (in English 3 days after the date of transaction). However because of the two different systems employed you will find differences between the two. With ZSE Direct you will have to wait the full 3 days to either use your money (if you sold) or your securities (if you bought). With Ctrade because you use a trading account you have access to your money or your securities immediately, the only exception being the withdrawal of money which is available after the 3 days.
Another basis upon which we can compare ZSE Direct and Ctrade is the information they provide to the user. Information needs to be relevant and timely to be useful to the user. ZSE Direct offers real-time trade data. The data is limited to the last traded price but is updated in real-time. ZSE direct also offers a market depth feature, this shows you the current offers available in the market on the buy and sell-side of security. This is useful information to have. Ctrade on the other hand provides delayed data by as much as 15 minutes, this creates an opportunity for a mismatch. In terms of market data Ctrade provides an indicative “Best bid” or “Best Ask” price depending on which side of the transaction you are.
Costs here refer to the fees for transacting on the platform and so excludes the fees associated with withdrawing money (which happen to be the same on both platforms anyway). The fees for transacting are identical with the same costs and levies being applied to transactions which amount to 1.55% when buying and 2.30% when selling.
Another thing we can look at is the array of products available on the two platforms. Investing isn’t just about buying individual shares on the ZSE after all. There are many other investment products out there. ZSE Direct currently offers access to all ZSE traded shares and the Old Mutual ZSE Top Ten Index Exchange Traded Fund (ETF). Financial inclusion isn’t just about giving people access to what’s there but also providing options that better suit their circumstances. Ctrade on the other hand also offers aces to all shares traded on the ZSE. To this, they add the Finsec listed Old Mutual Zimbabwe Limited and Old Mutual Unit Trusts. Another option that Ctrade offers that can be considered as a product are Investment clubs which allow users to pool funds for group purchases.
Since its launch, ZSE has only been available via a responsive website. This of course is a disadvantage and limits its reach. Ctrade offers a responsive website, Android app, iOS app and USSD for feature phones. Without a doubt, Ctrade offers more opportunities for inclusion both internationally and locally.
Which of the two platforms do you prefer if you’re a user?