Market Profiles

RBC IS operates an omnibus account structure in this market.

For further information or support around accessing this market, please contact your RBC IS representative.

JSE Limited (JSE)

The JSE is a multi-asset class securities exchange, offering investors deep liquidity across its product range. It provides:

• A primary market – sourcing issuers to list and supporting potential and existing issuers.
• A secondary market that facilitates trading in: equities; financial derivatives; commodity derivatives; currency derivatives; and interest rate instruments.
• Post-trade services – Through a division responsible for clearing, settlement and assurance.
• Technology services – that support the JSE’s operations; and
• Information services, including market data.

It also regulates the primary and secondary markets.

The JSE’s risk management structures guard effectively against systemic risk to which the Exchange and investors might otherwise be exposed.

The JSE is licensed to operate under the Financial Markets Act, 19 of 2012.

There is one cash market exchange in South Africa, The Johannesburg Securities Exchange (JSE) for equities and bonds after

JSE acquired BESA (the bond exchange of South Africa) in 2009.

The JSE uses the JSE "Millennium Exchange" trading system for equities, an order driven screen based dealing system where brokers can post transactions and orders pending within the system, and Nutron System for bonds.  In July 2015, JSE selected MillenniumIT to provide technology for its fixed income and derivatives markets. The migration will be conducted in phases, with the first phase being for equity and currency derivatives.

The JSE is one of the ten stock exchanges of the Southern African Development Community (SADC). These ten exchanges are working together to increase the effectiveness of their markets. In particular, they will explore ways to use technology to link their trading and order systems, and work together to ensure that the clearing and settlement systems align with the global standards adopted in April 2012 (CPMI/IOSCO Principles for Financial Market Infrastructures).

MultiAsset Clearing Technology Platform
The JSE will develop a new multi asset clearing technology platform in partnership with Cinnober, a financial solutions provider based in Sweden. The JSE currently uses different clearing technologies for different asset classes. The new multiasset platform, based on Cinnober’s TRADExpress RealTime Clearing system, will phase out the current clearing technology at the JSE in support of the JSE’s strategic focus on integrated clearing and settlement.

AltX
In October 2003, the JSE introduced an alternative market for small and medium sized listings, followed by the Yield X for interest rate and currency instruments. The JSE then acquired the South African Futures Exchange (SAFEX) in 2001 and the Bond Exchange of South Africa (BESA) in 2009. Today the JSE offers five financial markets namely Equities and Bonds as well as Financial, Commodity and Interest Rate Derivatives. ​​​​

Other Exchange Applications

4 Africa Exchange (4AX)
In June 2015, 4 Africa Exchange (4AX) submitted an application to the Financial Sector Conduct Authority (FSCA) to operate an exchange in South Africa. Upon receiving a license, they aim to provide a listing platform with a focus on companies with a market capitalisation between ZAR 100 million and ZAR 8 billion. They have partnered with Global Environmental Markets to provide the required technology for the exchange.

In September 2016, the Registrar of Securities Services in South Africa granted an exchange license with conditions to 4AX.

Strate acts as the CSD for trades on this exchange.

Equity Express Securities Exchange Proprietary Limited (EESE)
In August 2016, the Registrar of Securities Services notified that Equity Express Securities Exchange Proprietary Limited (EESE) has submitted an application for an exchange licence. ESES is looking to provide:

A platform that will guarantee pretrade eligibility of investors for those companies that want to impose restrictions on the nature of the investor;

Access to invest in securities for those persons that are currently excluded from the investing public;

A regulated overthecounter

• (OTC) solution;
• Reduced listing and compliance costs;
• Online trading which will give direct market access to investors;
• Reduced settlement risk through prefunding.

A2X Proprietary Limited (A2X)
A2X Proprietary Limited (A2X) submitted a request for an exchange license in May 2015. Once licensed, the exchange will be modelled on the European Multilateral Trading Facility and will list qualifying equities.

Regional Trading Links
The authorities in Kenya, Nigeria, South Africa and Morocco and the African Development Bank (AfDB) are looking to establish crossborder trading links. An MoU to work on this project, amongst others was signed in July 2016. A technical committee consisting of technical experts from the pilot exchanges and their CSDs has put in place a technical structure detailing viable trade and post trade processes.

4 Africa Exchange (4AX)

4AX is one of only two exchanges in SA with a full license to trade across asset classes including equity and debt.

The JSE Derivatives Market (Formerly SAFEX) 
The JSE Derivatives market is governed by the JSE Derivatives Rules and Directives. Bond, Interest Rate, Equity, Commodity and Currency derivatives can all be traded over the JSE Derivatives market.

Equities
Trading takes place on the JSE’s equities market using Millennium Exchange trading platform. The JSE trades in an order driven environment using the automated electronic matching system.

Circuit breakers
The JSE equities trading system may incorporate circuit breakers in one or more segments of the market. When a circuit breaker is triggered, it will either cause a suspension of continuous trading and the commencement of an auction call session or extend an auction call session for the affected security or securities. The circuit breaker is triggered when price movements exceed defined levels based on defined static and dynamic reference prices.

Trading halt
The surveillance director or his deputy, in conjunction with the Chief Executive Officer may declare a trading halt in an equity security if it is determined that the trading activity in the security:

• is being or could be undertaken by persons possessing unpublished price sensitive information;
• is being influenced by a manipulative or deceptive trading practice; or
• may otherwise give rise to an artificial price for that equity security.

No member may trade that equity security for the duration of the trading halt but may delete orders from the central order book.

Bonds
Following the merger between BESA and JSE, effective 9 May 2011, market participants execute all bond trades through the Nutron system.

Future developments
The JSE is currently running a project for the Integrated Trading and Clearing (ITaC) initiative. The ITaC project is a multi‐year program of work focused on the introduction of an integrated solution for the JSE’s trading and clearing services.  The objective of the project is to implement world‐class, multi‐product solutions to enhance the JSE’s current trading and clearing functions: on the trading ​side, that means migrating all Derivatives and Cash Bond markets to the MillenniumIT trading platform, while for clearing, it involves the migration of all markets onto the new Cinnober Real‐Time Clearing (RTC) solution.

Monday to Friday:

ISIN (International Securities Identification Numbering): Yes

Other: The JSE uses local alphanumeric codes and ISIN codes

The South African Reserve Bank (SARB) – The South African Reserve Bank is the central bank of the Republic of South Africa. The primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa. Together with other institutions, it also plays a pivotal role in ensuring financial stability.SARB enforces exchange control regulation and acts as supervisor of financial institutions in South Africa. In addition it also regulates licensing and monitoring of banks, organises and supervises T-bills and Government bond auctions, grants exchange licenses and monitors the foreign exchange market.  A memorandum of understanding (MOU) was signed between Strate and the SARB in July 2004. This serves as the agreement by which regulatory / compliance information on relevant prudential issues is shared between SARB and Strate.

Financial Sector Conduct Authority (FSCA)

The FSCA is the market conduct regulator of financial institutions, that provide financial products and financial services, financial institutions that are licensed in terms of a financial sector law, including banks, insurers, retirement funds and administrators, and market infrastructures.

The Financial Sector Conduct Authority (FSCA) is responsible for market conduct regulation and supervision. FSCA aims to enhance and support the efficiency and integrity of financial markets and to protect financial customers by promoting their fair treatment by financial institutions, as well as providing financial customers with financial education. The FSCA will further assist in maintaining financial stability.

• To ensure an efficient financial sector where customers are informed and treated fairly.
• To ensure a fair and stable financial market, where consumers are informed and protected, and where those that jeopardize the financial well-being of consumers are held accountable.

Strate (Pty) Ltd – is a Self-Regulatory Organisation (SRO) and regulates Central Securities Depository Participants (CSDPs).

JSE Limited – is a Self-Regulatory Organisation (SRO) and regulates South African Stockbrokers, bond exchange members and listed companies.

• All listed equities are eligible for dematerialisation in Strate. Physical listed equities cannot be traded unless dematerialised in Strate.
• Some bearer shares are issued but only negotiable on foreign exchanges. Those bearer shares must be converted to ordinary shares and registered in order to be settled in the South African market.
• T-bills, SARB debentures and phase 1 and 2 money market instruments (as detailed above) are dematerialised, registered instruments.
• Treasury Bills and Debentures (e.g.Bankers Acceptances; Debentures; Commercial Paper; Promissory Notes; Treasury Bills; Certificates of Deposit; Floating Rate Notes; Call, Zero and Bridging Bonds), are issued in dematerialised form only.
• All other Money Market instruments are held in bearer form in the local bank's vaults.

Equities, bonds, warrants, preference shares, debentures, exchange traded funds and Krugerrands are traded on the JSE. Effective 1 April 2013, property companies currently listed on the JSE either property loan stocks or property unit trusts converted to a REIT structure and any new listings in this sector have to comply with JSE REIT listing requirements.

ETFs
As of August 2015 Market participants of Nigeria, Kenya and South Africa are currently holding discussions on the possible launch of cross listing of ETFs, initially between the three exchanges.

For equities, the minimum price variation unit is ZAR 0.01.

ZAR

Off-exchange trading is allowed on all instruments and is regulated by Strate.

Book-Entry
All JSE listed equities and warrants are Strate eligible and must settle electronically via the depository. Two types of trades can be effected via Strate:·        

• On Market Transactions

  All on market transactions are matched within the JSE Electronic Trading system (Millennium Exchange). Each transaction captured contains details of the CSD Participant responsible for settlement of the transaction. Once a CSD Participant has committed to settling the transaction (either cash or securities), they are contractually obligated to settle the transaction on T+3 (SD). The matching process for on market trades is fully automated. Matching takes place within the Strate system. Deal execution and allocation is conducted in realtime  on Trade Date (TD), following which JSE members are required to submit contract notes to the client and, in the case of non-controlled clients, settlement instructions to Strate who in turn will generate allegements to the applicable CSD Participants (CSDP). Based on settlement instructions received from their client (confirming trade place in the market) the participant will commit to the allegement confirming to the market that their client holds sufficient shares or cash, or alternatively, the client can evidence that the securities or cash will be available for settlement on T+3 by means of the following:

  • Another transaction has been entered into by the client for the equivalent number of equity securities to be available forsettlement on T+3 or before;
  • The client has made arrangements to borrow the equivalent number of equity securities and the equivalent securities will be available for settlement to take place on T+3;
  • A corporate action provides for an equivalent amount of equity securities being available for settlement on settlement date;
  • The equity securities are being moved between primary and branch registers and the securities will be available on the South African register for settlement.

  Clients are required to submit settlement instructions to their CSDP by 12.00pm on T+1, however, in the event that a client provides a contract note rejection to their broker, they will have until 6.00pm on T+1 to submit their instructions following a reallocation by the broker. In this instance, the broker is required to correct the details of the contract note and resubmit it to the client by 6.00pm on T+1, in order for the client to provide instructions to their CSDP.

  CSD Participants have until T+2, 3.00pm to commit to the on market trade. If they cannot commit by this stipulated time period, they have to advise Strate Custody & Settlement Service Helpdesk providing the reasons for not being able to commit.

  Participants may uncommit to settlement orders, without the intention of recommitting, in exceptional circumstances and in consultation with Strate Operations and JSE Settlement Authority between 6.00pm on T+1 and 3.00pm on T+2, in accordance with Strate Directive SC.3 – Special Circumstances for the Reversal of Commitments.

  On settlement day (SD), Strate reserves the securities for the net positions and submits the payment (funding) obligations of its participants into the SAMOS system when the settlement is ready to be processed.

  Participants must instruct their settlement bank to fund the applicable SAMOS accounts within 30 minutes of having received their funding obligation for the first payment run, and again within 30 minutes of their receipt of the payment advice from Strate Operations for subsequent payment runs.

  SAFIRES’s netting system nets intermediate legs of the settlement process so that all transactions finally settle at CSD Participant level per security (net securities position) and at CSD Participant level across all securities for net cash obligations (net cash position). CSD Participants should ensure that adequate securities are available for settlement by the end of SD1, and these are blocked in the selling CSD Participant’s account from 6.00am SD until they are settled in the first processing cycle.

  A Reverse Substitution (either voluntary or compulsory) can be implemented on T+2, in the event that a client is unable to fulfil their settlement obligations.

  • Voluntary reverse substitution can take place on T+2 until 3.00pm. The introducing broker volunteers to take ownership of the trade by cancelling the trade with the client. The broker reports the trade with themselves as the proprietary client and either utilises their own securities or sources the securities through borrowing. The trade is then settled on the brokers account held with their CSDP.
  • Involuntary/compulsory reverse substitution take place on T+2 until 4.00pm, where the settlement authority forces ownership of the trade onto the introducing broker, due to the client not being able to fulfil their obligation to settle. The broker must source the securities to facilitate settlement.

   

  The broker reports the trade with themselves acting as the proprietary client, and either utilises their own securities or sources the securities through borrowing. The trade is then settled on the brokers account held with their CSDP. The broker is liable to pay the fine for reverse substitution, which can subsequently be passed on to the client.

  • If the broker is unable to source the securities, the Settlement authority will step in and will source the securities.
  • If the Settlement Authority is unable to source the securities, the results could be a failed transaction in the market.
  • Only at the discretion of the JSE will the the Failed Management process will be initiated, by the JSE will trigger the process

  from and this will take place from 16h00 on T+2.

  • At this point another transaction for the same value date and security can be selected by the JSE as a Terminating transaction.
  • Off Market Transactions:

  Off Market Transactions transactions consist of uncertificated securities transactions which are not executed through the JSE or any other licensed exchange, and include standard off market transactions, off market securities loans, account transfers, ADR transactions and portfolio movements.

  Standard off market transactions follow the normal T+3 cycle and are not guaranteed by the JSE or any other licensed exchange. Off market transactions are reported by the seller and purchaser of uncertificated securities to the relevant CSD participant. Immediately upon receipt of instruction from the seller and purchaser, Strate participants must book the deal into the CSD. The off market instruction will be reported and matched at Strate by the CSD Participant no later than 1.00pm on T+2 (SD1).

  Matching of transactions occurs automatically at Strate and consists of first and second level matching:

  First Level Matching:

  • ISIN
  • Settlement Type (RVP/DVP/RFP/DFP)
  • Securities Quantity
  • Trade and Settlement Date
  • Buyer’s/Seller’s Safekeeping Account Number
  • Trading Party’s / Counterparty’s BP ID

  Second Level Matching

  • Client type
  • Consideration/Rand Amount
  • Taxable Indicator

  Orders that fail at second level matching will be reported to the respective participants that will invoke a manual matching process that will involve a telephone call and/or email exchange to confirm a match. Clients will be informed of the reasons for mismatches via MT548 and email updates.

  Participants are required to commit to Off market transactions by 3.00pm on T+2, which is also the deadline for any Back to Back links to be in place.

  Same day off market trades (Excluding Securities Lending loan or collateral transactions) will only be permitted under certain circumstances only as per Strate Directive SC.2 Operational Market Windows – Off Market Equities.

  Prior authorisation must be received from Strate for these trades and an administration fee will be applied. CSD Participants must submit requests for approval by 1.00pm for versus payment transactions. If approved, instructions must be reported, matched, and committed by the CSD Participant by 2.00pm on SD.

  A Participant may uncommit to an Off market transaction where there is no On market dependency up until 3.00pm on T+2. The participant will be required to advise the counterparty and Strate Operations, who will either accept the request or, if there is an on market dependency, consult the JSE Settlement Authority for approval.

  Free of Payment (FOP) Trades, Portfolio Movements and Account Transfers

  Internal account transfers involving a single CSD Participant, which follow a T+0 cycle, must be reported, matched and committed by 6.00pm to the CSD.

  All account transfers and Portfolio Movements must be reported as Free of Payment (FOP) transactions involving no change in beneficial ownership (NCBO). In the event that a CSD Participant receives an account transfer or Portfolio Movement instruction after the cut off time for reporting orders to Strate, or the orders do not match by the cut off time, the CSD Participant may facilitate the settlement process by reporting the account transfer instruction to Strate for the next available settlement date. This facilitation process may continue for a maximum of 6 business days after the trade date of the original instruction after which it must be cancelled. CSD Participants will not be permitted to amend the trade date of the original instruction.

  Settlement of cash and securities, transfer of ownership is simultaneous, final and irrevocable (SFIDVP).
  
  Bonds

  Strate (Pty) Limited "Strate" took a strategic decision in 2013 to replace its core custody and settlement systems and consolidate these into a single platform. The "TCS BaNCS MI" system was chosen and Money Market Securities were successfully migrated onto the platform at the beginning of 2016.

  The Strate Regulatory and Supervisory Committee  announced the end of the fine waiver period for breaches of the operational directives for bonds settlement. From July 18, 2018, Directive SF.3 Fines Schedule – On-market, Off-market and Unlisted – Bond Securities will be strictly enforced.

   

  Strate's "DIS Project" is the strategic project to replace Strate's previous "UnexCor" system and migrate Bonds Securities onto the TCS BaNCS MI platform during 2017. Equities Securities will be the last migration and this is planned for the end of 2018.

  The key project currently being undertaken by Strate and the South African capital markets is the "DIS Project". This project will ensure not only the replacement of Strate's core custody and settlement system with regards to Bonds Securities, but will include the introduction of an upgraded Settlement and Capital Events model for Bond Securities.

  Strate is the licensed electronic:

  • Central Securities Depository (CSD);
  • Clearing House; and
  • Payment Clearing House (PCH) Operator, in terms of PASA (Payments Association of South Africa) rules, for the South African Debt Instrument / Bond market. Strate facilitates the settlement of all Bond On-Market and Off-Market transactions. Strate provides comprehensive electronic settlement and capital events system. For cash settlement, Strate uses South African Reserve Bank's (SARB) South African Multiple Option Settlement (SAMOS) system to achieve Simultaneous Final Irrevocable Delivery versus Payment (SFIDvP).

  Bonds transactions will adhere to the following settlement cycles:

  • Standard T+3;
  • Non-Standard - i.e. will allow for shorter cycles up to T+0; and
  • Long dated settlements for forward legs of transactions which include normal Bond trades (forwards) and SARB Reverse Repurchases, Repos.

   The following principles apply for On-Market Settlements:

  • On-Market Settlements will conform to the Bank for International Settlements (BIS) Model 2 (Gross Securities and Net Cash at CSD Participant level);
  • The JSE will report all the On-Market Trade details to Strate on a gross basis;
  • Strate will generate Settlement Allegements for all Member, Member Proprietary and Non-Member settled instructions at the Central Securities Account (CSA) level. The Settlement Allegements will be sent by Strate to CSD Participants on a gross trade-by-trade basis;
  • CSD Participants will commit to all the Settlement Instructions if the cash / securities are available in the client's account, or commit based on a link (Back-to Back [BTB] or Dependency Link [DPL]);
  • Settlement will occur on a Simultaneous Final Irrevocable Delivery versus Payment (SFIDvP) basis;
  • All funds (cash) settlements will occur using Central Bank Funds;
  • Only Nominal value and Consideration will be reported to the CSD (Price and Yield will no longer be required).
  • Settlements and Capital Events Process Guide 4

   

  The following principles apply for all Off-Market Settlements:

  • Off-Market Settlements will conform to BIS Model 2, (Gross Securities and Net Cash at CSD Participant level);
  • The CSD Participants will report all transactions to the CSD on a gross basis;
  • CSD Participants will commit the Settlement Instructions if the cash / securities are available in the client's account, or commit based on a link (Back-to Back [BTB] or Dependency Link [DPL]);
  • Settlement will occur on a Simultaneous Final Irrevocable Delivery versus Payment (SFIDvP) basis;
  • All funds (cash) settlements will occur using Central Bank Funds.

   

  Transaction Types

  For On-Market transactions, the following transaction types will be settled:

  • Vanilla Spot Bonds;
  • Repurchases (Repo's) First Leg;
  • Repurchases (Repo's) Second Leg;
  • SARB Repo First Leg;
  • SARB Reverse Repo Second Leg;
  • Structured Trades;
  • Securities Lending and Borrowing; and
  • Money Lending and Borrowing.

   

  For Off-Market transactions, the following transaction types will be settled:

  • DVP / RVP: Deliver / Receive versus Payment;
  • DFP / RFP: Deliver / Receive Free of Payment;
  • DPL / RPL: Deliver / Receive Pledge;
  • DRL / RRL: Deliver / Receive Release Pledge.

   

  Furthermore, within the Debt Instrument / Bonds market there are various categories of Off-Market transactions:

  • Standard Off-Market Trades which adhere to a T+3 settlement cycle;
  • Account Transfers;
  • Portfolio Moves;
  • Charity Shares;
  • Lending Account Transfers;
  • Securities Lending and Borrowing (SLB); and
  • Repurchases (Repos).

  Commits, Back-to-Back Links (BTB) and Dependency Link (DPL)

  CSD Participants can link (BTB) multiple delivery transactions to multiple receive transactions, provided all transaction in a BTB belongs to the same Central Securities Account, ISIN and Settlement Date.

  CSD Participants can use DPL for interdependent receive and deliver transactions across different settlement dates to commit to the Trade Legs. This is a functionality within a Participants own custody and settlement system.

   

  On-Market and Off-Markets Settlements Process

  The following applies for the settlement processes:

  • Free of Payment Transactions in "Ready for Settlement" status, with no links will settle as soon as they are marked as "Ready for Settlement", provided requisite securities holdings are available in the seller's Central Securities Account.
  • Initial Settlement Run (planned to be initiated every day at 10h00)

  o All transactions in "Ready for Settlement" status will be processed, where securities are available in the sellers' Central Securities Accounts.

  o Once Reservation is processed successfully:

  • A Payment Advice will be generated for all CSD Participants.
  • A Payment Instruction will be generated to the Central Bank.
  • As soon as funds are transferred at the Central Bank, the CSD will initiate Securities transfer; and notify the CSD Participant and the JSE accordingly.

   Subsequent Settlement Runs

   

  o These runs will be initiated by Strate every hour on the hour. The final settlement run takes place at 15h15.
  o For uncommitted Trade Legs, the Client will source the securities from Lenders using SLB Business Partners.
  o Failing this, with regards to On-Market transactions, the Client must approach the JSE Settlement Authority to facilitate the arrangement of a securities lending transaction.
  o The JSE Settlement Authority, in conjunction with National Treasury, may create Repo Transactions and enable the CSD Participants to commit to these Trade Legs.

   

  The implementation of DIS will improve the processing and automation of Capital Events in the Debt Instrument / Bonds market.

Physical Listed Securities: Physical settlement is generally not permitted in South Africa. All shares must be dematerialised in Strate before settlement can take place. However, physical settlement is permitted for certain corporate bonds that are still in physical form and for private unlisted companies

South Africa Market Trade Flows

The JSE’s equities rules regulate against naked short selling in that they provide that a member may only enter an order on the

JSE equities trading system or report a trade to the JSE equities trading system if the member has appointed a CSDP, has

SWIFT connectivity as prescribed by directive and has taken reasonable steps to satisfy itself that, in respect of a sell order:

• a controlled client has evidenced to a member that they own the equity securities to be sold in uncertificated form and that such securities will be available for settlement on settlement date; or
• another transaction has been concluded which provides for an equivalent amount of equity securities being available for settlement on settlement date; or
• a satisfactory borrowing arrangement is in place which provides for an equivalent amount of equity securities being available for settlement on settlement date.
• a corporate action provides for an equivalent amount of equity securities being available for settlement on settlement date.

Turnaround trading is possible in South Africa.

Strate is the clearing agent for JSE and other licensed exchanges as well as all off market transactions. Bonds and Electronic Money Market securities are cleared through Strate. 

The off-market electronic matching was introduced on April 20, 2015. There are two levels of matching for all market trades. For the first level, the trade information related to ISIN, trade type, share quantity trade, settlement dates, trading parties and buyer / seller account number will be matched, and the taxable indicator and consideration value will be matched at the second level. Off-market instructions, i.e., MT540, MT541, MT542 and MT543, must contain the counterparties safekeeping account numbers. If the market completes the first level of matching, but fails at the second level, an MT548 shall be sent to the client.

Strate Limited acts as depository for safekeeping and provides clearing, settlement and electronic safekeeping for JSE listed equities,  fixed income securities and electronic money market instruments.

BIS is an international organisation which fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. The Committee on Payments and Market Infrastructures (CPMI) uses three common structural approaches, or models, to categorise the links between delivery and payment in a securities settlement system.

Equities and Warrants:

JSE transactions: Model 3 Net simultaneous transfer of securities and cash.

Ringfenced transactions: Model 2 Gross simultaneous settlement of securities and net funds transfers.

Bonds:

10.30am batch: Model 3 Net simultaneous settlement of securities and funds transfers.

2.30pm batch: Model 2 Gross simultaneous settlement of securities and net funds transfers

With the implementation of the Debt Instrument Solution at Strate, the settlement timeframes are expected to change. The new system is expected to enable multiple settlement runs and the flexibility to settle all three BIS settlement models.

Money Market Instruments:

Gross trade by trade (Model 1) settlement of cash and securities

Book-Entry: All JSE listed securities are registered in the subcustodian's (CSDP's) nominee name at Strate. Strate processes book-entry ownership transfers for dematerialised equities.

All JSE listed debt instruments are registered in the subcustodian's name in Strate. Strate processes book-entry ownership transfers for bonds.

Physical: All JSE listed equities are Strate eligible and must be dematerialised prior to settlement via the depository. Registration is immediate upon compulsory (electronic) T+3 rolling settlement.

Computershare; Link Market and Terbium Financial Services.

The maximum registration period for physical securities is 21 days. Re-registration of securities held in Strate is evidenced through the transfer of securities on the book-entry register of Strate and is immediate upon settlement. Securities are not blocked from trading or sale during the registration process.

Shareholdings in this market may be required to be disclosed by the beneficial owner, particularly when holdings reach or exceed prescribed disclosure limits. Investors must ensure that they comply in full by reporting such holdings to the appropriate organisations for this market, within the timeframe required. If you have any questions regarding this issue we encourage you to consult your legal counsel. 

Failure to comply with reporting requirements may lead to penalties and/or other sanctions.

Equities

No buy-in facility exists for equities or bonds. Once a CSD Participant has committed to settling the transaction, they are contractually obligated to settle the transactions on T+3 (SD). Any non-controlled client transaction that is not committed to by the cut off time will be compulsorily reverse substituted to the broker on T+2. Voluntary reverse substitution begins on T+2 and are sent in rea ltime until 3.00pm on T+2. Compulsory Reverse Substitution settlement orders must reach the Strate System by 6.00pm on T+2.

As part of the reverse substitution programme, Strate will generate cancellation advices to the relevant CSD Participant for on market trades that have not been committed to allow the on market group to move forward. The JSE will attempt to source the securities to allow commit and ultimately settlement. In the event that the JSE is successful in sourcing the securities, the transaction will be booked against the relevant broker’s account for commit and settlement as per the contractual settlement date. Where the JSE Settlement Authority is unsuccessful in sourcing the securities, the JSE, through consultation with the relevant market participants, will identify a terminating transaction. Where such transaction is not identified, the JSE Settlement Authority will prescribe which transaction will be closed. The relevant CSD Participant and broker will be advised of its intention and the CSD Participant will be requested to lift the commit from the transaction.

Bonds
Bonds trades excluded from the first settlement run will automatically fall over to settle with the same-day trades during the second settlement run.

If the problem is not solved before SD 13:30 (booking window cut-off time), members can again request an extension (at a cost) from the JSE to do corrections. 

By 14:15 all trades must be committed for settlement. Trades not committed will fail the day's settlement. All failed trades for the day, can be re-entered/re-instructed into the settlement system for the next day's settlement run. 

The JSE might request the cancellation of the trade and conclusion of a new trade in the market. The defaulted counterparty can claim loss resulting from the new trade.

A JSE member who has sold securities on behalf of their client is required, in the event that the trade fails and if the counterparty is intended to deliver those securities, to "buy-in" the securities on the market, and is allowed to recover related costs from their client.

There is an active securities lending market, which is officially recognised by SARB / SARS with many participants who are both lenders and borrowers, both domestically and internationally.

Collateral for securities lending when actioned through a local South African institution (such as a CSDP), must be in ZAR denominated assets, - either ZAR cash, ZAR securities (equities or bonds), or other ZAR instruments such as promissory notes or money market instruments. Where both the lender and borrower are non-residents of South Africa and the lending transaction is initiated offshore, then the two parties may use any form of non ZAR collateral, e.g. GPB / USD cash or gilts.

Most of the lending desks in South Africa accept ZAR, Top 100 Equity and GILT Bonds and currently do not accept other money market instruments such as Treasury Bills or Promissory notes. Even in the event of a transaction between a foreign borrower and Lender, SA Equity or ZAR will be asked as collateral (in practice). 

The JSE operates two compensation funds:

• Equities: The JSE operates a guarantee fund to protect counterparties against the default of a member. The JSE Guarantee Fund will reimburse any direct losses of a defaulting member's counterparty up to ZAR 5 million per member.In the event that the net assets of the fund fall below the required minimum value of ZAR 50 million, the trustees of the fund shall levy contributions from the JSE Member sufficient to bring the nett assets up to ZAR 50 million.
• Bonds: BESA also maintains a standing guarantee fund for settlement assurance in the event of a counterparty default or a temporary liquidity shortfall. The fund provides immediate cover, to the extent of ZAR 100 million (USD 12.5 million at an exchange of ZAR8=1USD), to members and clients against re-transaction price risk in the event of a member default. For bonds, Strate has insurance underwritten by Lloyds of London with cover of ZAR 100 million.
• Other Guarantee Fund: As part of its risk management procedures, the JSE has extensive guarantee funds and insurance cover across all areas of its business, including an "In and Out" fidelity insurance policy with cover of ZAR 250 million covering fidelity related claims by authorised users and the JSE.
• The policy is subject to the JSE being liable to absorb the first ZAR 5 million of any successful claim lodged in terms of the policy. This ZAR 5 million exposure is in turn selfinsured by the JSE through a structure managed by Hollard Insurance Company

South Africa is a full member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and is now a full member of the Financial Action Task Force on Money Laundering's (FATF's). In joining the ESAAMLG Committee, South Africa has agreed to participate in mutual evaluations and hold a periodic workshop on money laundering methods and trends. The ESAAMLG Committee evaluation of South Africa's anti-money laundering measures is not yet available. 

The Financial Intelligence Centre Act (FICA) introduced a comprehensive anti-money laundering regime in February 2003, designed to meet the major FATF recommendations.

Prevention of Organised Crime Act 42 of 1999:

• Incorporates money laundering offences, racketeering, etc
• Reporting to the authorities
• Tipping off
• "Wilful blindness"
• Confidentiality not breached
• Asset forfeiture - "instrumentality of offence"

Financial Intelligence Centre Act 38 of 2001:

• Defines money laundering
• Refers to all accountable institutions
• Policies and procedures in place by accountable institutions
• "Know your customer" requirements'
• Source of transactions
• Record-keeping
• Ongoing training
• Suspicious based reporting

Regulations 47 and 48 of Banks Act 94 of 1990
"A bank shall implement and maintain policies and procedures to guard against market abuse and financial fraud,…including money laundering"
"A bank shall implement and maintain policies and procedures…(which) as a minimum…shall be adequate to…identify customers and, in particular, recognise suspicious customers and transactions"
"…high ethical standards in all business transactions..and provide adequate training…."

None

Foreign investors cannot hold more than 15% of the issued share capital of banks, and no more than 25% of the total equity of insurance companies without the authorisation of the Registrar of banks or Registrar of Insurance Companies.

Capital and income can be fully repatriated.

There are no FX or repatriation restrictions for foreign investors. However, foreign investors wishing to repatriate sale proceeds must provide evidence of the ownership and sale of these securities.

The National Payments System is regulated by PASA (The National payments Association of South Africa) and overseen by the South African Reserve Bank ('SARB'). The National Payments system SAMOS (South African Multiple Option Settlement System) accommodates RGTS (Real Time Gross Settlement) as well as various other payment streams.

From December 31, 2020, cheques are no longer in use in the national payment system.

Under Exchange Control regulations in South Africa, overdrafts for non-residents are not permitted.

Entitlements are determined on Record Date (RD). Payment is effected electronically on Pay Date (RD+1).

Semi-annual / annual

Semi-annual in equal amounts

Actual / 365 day basis

N/A

Equities – rights and entitlements are protected based on traded positions.

Unrestricted voting rights on ordinary shares. Company specific restrictions are outlined in meeting agendas.

No

Provided in English. AGMs and EGMs are announced no later than 14 days in advance.

Yes, subject to availability

On request subject to availability. Many reports can be downloaded from the company's website.

Not required, as all shares are registered in a subcustodian's nominee name.

All JSE listed companies are required by the JSE to comply with the JSE reporting deadlines for annual accounts, AGM and dividend announcements.

Dividends Tax was implemented on April 1, 2012. Dividends Tax is levied on the person entitled to the benefit of dividend attaching to the share (except for Dividends in Specie). 

Dividend Tax is a withholding tax levied at a flat rate of 20% on the amount of any dividend paid, subject to various exemptions and reductions (Effective February 22, 2017, the rate of dividend withholding tax increased from 15% to 20%).

The Beneficial Owner (meaning the person entitled to the benefit of the dividend attaching to a share) will be liable to pay the Dividends Tax on all dividends, other than dividends in Specie (i.e. distributions of assets), but the company declaring the dividend to the Regulated Intermediary (SGSS) will withhold the dividends tax from the dividends paid the Beneficial Owner.

The Dividends Tax creates a host of compliance requirements and places various administrative obligations on both SGSS and the Beneficial Owner. 

In order to ensure that the Beneficial Owner receives the exemptions or the reductions in Dividends Tax that he/she may be entitles to, the Beneficial Owner must comply with SARS (South African Reserve Bank) requirements. 

For any queries relating to the application of exemption and double-taxation agreements, SGSS strongly advises its clients to consult their preferred tax practitioner.

The following websites and web pages offer useful, official documentation:

The SARS "Dividends Tax" page: http://www.sars.gov.za/home.asp?pid=73591

The up-to-date version of the Income Tax Act, of which part VIII deals with Dividends Tax: http://www.sars.gov.za/lnb/mylnb.asp

The SARS "Double taxation agreements" page: http://www.sars.gov.za/home.asp?pid=3919

Effective March 1, 2015, National Treasury introduced a 15% withholding tax on interest payments made to foreign persons from a source within South Africa, or interest payments received by or accrued to a foreign person from a South African source.
Exemption
An amount of interest is exempt if it is paid by:
-The Government of South Africa 
-Any bank, including SARB, Development Bank of South Africa or Industrial Development Corporation
- A headquarter company relating to financial assistance where the headquarter company directly or indirectly holds 10% of the equity and voting rights.

An amount of interest is exempt if it is paid: 
-In connection with listed debt (Bonds listed on the JSE)
-Interest payable to any foreigner that is a client, to whom a regulated person provides securities services, acts as an agent for another person about those services in which case it will include the agent or exclude the other person, of the contractual arrangement between the parties shows this to be the intention. 

A foreign person is exempt from WTI if:
-They are a natural person who was here in South Africa for a period more than 183 days in total during the 12 months before the date when the interest is paid
-The debt claim for which interest is paid is effectively connected with a permanent establishment of the foreign person who is registered as a taxpayer in South Africa.

Not applicable to foreign investors.

A non-resident is only liable to CGT on immovable property in South Africa or assets of a "permanent establishment" (Branch) in South Africa. Certain indirect interest in immovable property such as shares in a property company are deemed to be immovable property.

JSE listed securities are no longer traded physically, therefore stamp duty is no longer applicable (see comments below).

Securities Transfer Tax (STT) replaced Stamp Duty (SD) and the Uncertificated Securities Tax (UST) on securities (i.e. single tax) in respect of any transfer of listed and unlisted securities. 

The Securities Transfer Tax Act ensures that the rules governing both listed and unlisted securities are aligned and came into effect on July 1, 2008. STT will be calculated at the same rate of 0.25% based on the market value of listed and unlisted securities. 

The tax is payable by local and foreign investors, whether in normal or arbitrage trade. JSE members are liable for the tax on client purchases, where there has been a change in beneficial ownership. JSE members are not liable on proprietary positions, provided that they are not held for longer than six months. The clients are liable for tax on off-market trades (purchase) where there has been a change in beneficial ownership. The CSDPs are obliged to collect the STT from eligible clients and make payment to SARS by the 14th day of the following month for Listed Securities. For unlisted Securities STT must be paid within 2 months from the end of the month in which the transfer of the unlisted security took place.

South Africa Holiday Calendar

• JSE Securities Exchange jse.co.za
• South African Reserve Bank resbank.co.za
• Strate strate.co.za
•  Financial Sector Conduct Authority https://www.fsca.co.za/Pages/Default.aspx
• A2X Markets - https://www.a2x.co.za/