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Page last updated
February 15, 2003

 

 

I

South Africa has caught up

The South African Securities market

The South African Markets are embodied in the Johannesburg Stock Exchange (JSE), the Bond Exchange of South Africa (BESA) and the South African Futures Exchange (SAFEX). Evolution in the south African Securities markets is continuing at a rapid pace towards internationally recognised criteria and particularly the Group of 30 Recommendations

THE JOHANNESBURG STOCK EXCHANGE (JSE)
The JSE supports a process of fully automated electronic trading. Corporate ownership of member firms is now permitted with both domestic and international banks forefront of such developments.

Trading and Settlement Procedures
Equity transactions are currently concluded on the JSE’s electronic trading system, known as JET, for settlement the following Tuesday. Should an equity transaction not be settled on the stipulated day, it is not regarded as a failed trade. The relevant parties will liaise with each other and endeavour to settle as soon as possible on or after settlement date.

Currently settlement for the equity market involves the manual exchange of funds and scrip.

The net settlemewnt of equity trading positiions (broker to broker) takes place within the Equities Clearing House operated by the JSE.

STRATE
STRATE, or Share TRAansactions Totally Electronic, is the name given to a new electronic settlement system for transactions that have been concluded in South African equities.

It is envisaged that STRATE will be gradually phased in over a period of 18 months starting approximaztely in mid 1999 with a limited number of counters.

Some major features of STRATE include the following:

Initial settlement will take place ona contractual and rolling (t+5) basis (ultimately t+3).

Settlement of transactions will takeplace on a trade by trade basis, i.e., gross settlement.

Simultaneous, final and irrevocabledelivery verus payment (SFIDvP) entails the secure transfer of ownership with secure transfer of value.

The settlement process will interface with the National Payment System (NPS)

THE BOND EXCHANGE OF SOUTH AFRICA (BESA)

The process to immobilise bonds was initiated in October 1995 by BESA’s predecessor, The Bond Market Association of South Africa

BESA was licensed in May 1996 and since then more than 95% of all listed bonds have been immobilised in the Central Depostory, although immobilisation of financial securities is still not required by stature.Settlement takes place in an electronic and netted fashion on a rolling (t+3) basis.Secure delivery versus paymet has been achieved for all bond market transactions via electronic settlement with scrip and funds transfers being handled by the major clearing banks, the CD and the SARB.

Net Settlement
Settlement agents manage BESA’S electronic settlement process by utilizing trading information reported to BESA’s recognized clearing house - the Universal Exchange Corporation Limited (UNEXcor).

Settlement agents have direct access to the Central Depository (CD) and have clearing accounts with the South African Reserve Bank (SARB).

THE CENTRAL DEPOSITORY (CD)
In 1989 the four major clearing banks in South Africa ABSA Bank, First National Bank, Nedcor Bank and Standard Corporate Bank and Merchant Bank joined forces to establish the Central Depository Limited.

The SARB is also represented on the Board of Directors of the CD and has the right to appiont the chairman.The CD is currently operating effectively in the bond market.

SECURITIES LENDING
Although there is no specific legislation in respect of securities lending and borrowing in South Africa, a well-established and growing securities lending market exists.

ISIN NUMBERING
BESA as well as the JSEhave implemented the ISIN numbering system to be used for cross border transactions.

NATIONAL PAYMENT SYSTEM
South Africa’s National Payment System provides the economy with avenues for processing the payments resulting from various economic activities - whether arising from South African businesses transacting in the global market or the individual payment requirments of its inhabitants.

The National Payment System encompasses not only the clearing of payments between banks, for which an efficient infrastructure is already in place, but the total payment process - from payment-instruction issue through to final settlement between banks at the South African Reserve Bank.

The National Payment System is concerned with ensuring that non-cash payments are irrevocable and that risks, in particular systematic risk, are adequately contained.

THE SOUTH AFRICAN FUTURES EXCHANGE (SAFEX)
SAFEX began operating on 30th April 1990 and has made considerable progress. The Financial division member’s interest, initially comprised of the capital raised through the issue of seats. The exchange started out with financial futures and it now offers financial and commodity futures and options as well as Futures on individual Equities, with complex risk management, allowing off set between interrelated products.

SAFEX took its place among the more advanced futures markets when it introduced an electronic trading systems (ATS) to complement its clearing and settlement system, both now operated by the Exchange and Clearing house.

Functions of the Clearing member

The main object of the Clearing member is to guarantee Settlements of all its members and member clients to and from SAFEX.

The clearing member also limits the sum of the risk of loss of the proprietary position of a non-clearing member and the clients of such member.

To set dealing limits to non-clearing members of SAFEX.

Accept trades on behalf of its non-clearing members.

Enforce all rules laid down by SAFEX.

Maintain all margins.

Daily settlements.

Interest payments.

Accounting of all members and member clients.

Provide daily settlement statement.

Membership

Membership is made up of banks, JSE brokers, independant brokers, institutions, corporates and co-operatives.

Exchange Control

Foreign participants require exchange control approval.

CUSTODIAN SERVICES

Several South African financial institutions offer custody and settlement services.

These services generally include:

specialised local and global (through strategic alliances) safe-keeping services;

clearing and settlement;

the handling of corporate actions;

income collection and distribution;

tax relief and reclamation;

banking facilities such as cash management;

securities lending;

Most institutions offer direct communication interfaces to SWIFT using global ISITC standards.

 


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