Interbank trading platform on cards

Monetary authorities are looking to enhance the efficiency of the foreign exchange interbank market by introducing a new electronic trading platform.

The interbank market was introduced this February to normalise foreign currency trading and curb the inflationary parallel market. At the time of its launch the interbank rate was initially pegged at 1:2,5 as a guidance rate.

The RBZ then removed the guidance rate, and the local currency has been depreciating against the US dollar to trade at an average of 16,16 to the US dollar this week.

But trades have been low with the parallel foreign currency market also impacting negatively. The authorities are currently looking to improve the performance of the interbank market.

The apex bank’s Monetary Policy Committee (MPC) member Eddie Cross said the electronic trading platform for the interbank market will help attract more activity on the market, which will in turn help to stabilise the rate. The MPC is a committee that formulate policies affecting money supply and interest rates in the economy.

“Next week we hope to launch the new electronic trading platform for the Interbank Market and if we can attract enough foreign exchange to the market, it will help steady the rate and eventually, we hope it will strengthen the rate over time,” he said.

Electronic trading platforms typically stream live market prices on which users can trade and may provide additional trading tools, such as charting packages, news feeds and account management functions.

Other e-platforms can be expressly designed to allow individuals to gain access to financial markets that could formerly only be accessed by specialist trading firms.

The decision by the RBZ to introduce an e-trading platform is perhaps an outcome of the latest MPC meeting held on November 15, which saw the establishment of a Working Group on how to make the interbank market more efficient.

Speaking on the outcomes of the last MPC meeting central bank governor Dr John Mangudya, outlined this decision.

“Concerning the operations of the interbank foreign exchange market, the Committee resolved to set up a Working Group comprising of the Reserve Bank officials, treasurers from Authorised Dealers and members of the MPC to review the rule of the interbank market, with a view to improving its efficiency,” he said.

“The Committee also underscored the need to incorporate Bureaux de Change in the process in order to expand, deepen and enhance the operational efficiency of the interbank market. In addition, the Committee agreed to launch the market tracker under the Reuters system, which is intended to enhance transparency in the operation of the interbank market, by the end of November 2019.”

The next MPC meeting is set for November 29, with a likelihood that the modalities of the electronic forex trading platform for the interbank market being published shortly after.