Settlements Flashcards
Define “certificated equity securities”
Equity securities evidenced by a certificate.
Define “contract note”
Notes issued in respect of trades executed on the JSE equities trading system by a member on any particular day :
1. on behalf of a client, a confirmation from the member to the client in respect of such trades; and
2. on behalf of a member’s proprietary account, the aggregate trades executed on such account
Define “CSDP”
A central securities depository participant that has been accepted by a central securities depository as a participant in that central securities depository
Define “dematerialisation”
The process of converting a certificated equity security into an uncertificated equity security.
Define “failed trade”
A transaction in equity securities which the Settlement Authority deems to be a failed trade on the basis that neither the client, the member nor Settlement Authority is able to ensure that the transaction will settle on the settlement date or any revised settlement date.
Define “funds settlement account”
A funds account with a CSDP in the name of a member used exclusively for the settlement for funds relating to transaction in equity securities.
Define “JSE settlement system”
The computer system or systems and associated network or networks operated or used by the JSE for the purpose of settling transactions in equity securities
Define “margin”
A payment made or guarantee provided by a member to the JSE to assure settlement of transactions in equity securities by that member or its clients.
Define “non-controlled client”
A client or an account holder on whose behalf a client is acting, who has appointed his own CSDP to settle transactions in equity securities on his behalf.
Define “registered owner”
A person or entity which appears on the main register of an issuer kept in terms of the Companies Act, and a person or entity which appears on the uncertificated securities register of that issuer kept by a CSDP in terms of the Companies Act.
Define “ring-fencing”
The process in which linked deliveries and receipts which emanate from off book trades are separated and distinguished from deliveries and receipts which emanate from transactions in the central order book of the JSE equities trading system.
Define “settlement agent”
Means a CSP or other member appointed by a member in terms of directive FI to assist the member in managing the settlement of transactions executed by the member on behalf of non-controlled clients.
Define “Settlement Authority”
The person or persons appointed by the JSE to manage the settlement of transactions in equity securities effected through the JSE equities trading system in terms of the rules and directives.
Define “settlement commitment”
An electronic undertaking by a CSDP to settle a transaction in equity securities.
Define “settlement date”
Settlement date means, in respect of a transaction in equity securities, the date on which the transaction is due to be settled.
Define “terminating transaction”
A purchase of equity securities which have not subsequently been sold or a sale of equity securities which have not subsequently been purchased
Define “uncertificated equity securities”
Equity securities that are not evidenced by a certificate and are transferable by book entry without a certificate.
Define “uncommitted settlement”
A settlement obligation for which a CSDP has not provided a settlement undertaking.
the principles relating to the settlement of equity securities transactions through Strate?
- Contract note by contract note.
- Between the ultimate buyer and the ultimate seller.
- On a rolling and contractual basis, whereby transactions become contractually due to be settled a prescribed number of days after the trade date.
- On a net basis per member per trade type and per equity security, whereby individual contract notes are consolidated and offset into net amounts of securities and funds for settlement.
Who shall be responsible for the payment of any penalty imposed on the member by the Settlement Authority where the client was at fault for causing a failed trade?
The client who caused a failed trade.
Itemise 6 powers of the Settlement Authority?
- Manage the settlement of off book trades where ring-fencing has occurred.
- In exceptional circumstances, extend the times referred to in rules 10.60 to 10.110.
- Monitor settlement obligations of members and their clients.
- Ensure that the settlement obligations of members are met on the settlement date.
- Monitor uncommitted settlements and take appropriate action in respect of such settlements.
- Take action when a settlement of a transaction in equity securities is unlikely to take place on settlement date.
What is a client required to do prior to placing a sale order in Equity Securities?
- In the case of a non-controlled client, ensure that the client has appointed a CSDP.
- In respect of a sell order ensure that:
a. the equity securities to be sold are held in uncertificated form by the member’s CSDP, in the case of a controlled client, or by the client’s CSDP, in the case of a non-controlled client; or
b. a controlled client is able to evidence to a member that they own the equity securities to be sold in uncertificated form and that such securities will be available for on settlement date; or
c. another transaction has been concluded which provides for an equivalent amount of equity securities being available for settlement on settlement date; or
d. a satisfactory borrowing arrangement is in place which provides for an equivalent amount of equity securities being available for settlement on settlement date; or
e. a corporate action provides for an equivalent amount of equity securities being available for settlement on settlement date; or
f. the equity securities to be sold will be transferred from a foreign register to the local register and such securities will be available for settlement on settlement date.
What are the settlement obligations of a non-controlled client?
- Settle through the client’s CSDP.
- Give instructions to CSDP to settle by not later than 12h00 on the first business day after trade date.
- If a correction of an allocation results in a new trade the client must give its CSDP the instruction to settle in sufficient time to enable the CSDP to commit to settle by 12h00 on the 2nd business day after trade date.
- Ensure and procure that his CSDP has committed to settle by 12h00 on the 2nd business day after the trade date.
- If his CSDP has not committed to settle in terms of 4 above, ensure that his CSDP commits to settle by 15h00 on the 2nd business day after the trade date.
What are the settlement obligations of a controlled client?
By no later than 16h00 on the first business day after trade date to ensure that the member will be in a position to settle the transaction on settlement date either by
1. providing the equity securities or funds required to settle the transaction. OR
2. Entering into an arrangement with the member to facilitate settlement of the transaction.
Itemise 7 of a member’s settlement obligations.
- Endeavour to ensure settlement of transactions it has effected.
- Settlement officer must advise SA when any equity securities transaction is unlikely to settle.
- It may not alter or stop payment in respect of a STRATE settlement instruction.
- Ensure that its CSP or settlement agent (if applicable) complies with the rules.
- By no later than 12H00 on the 2nd business day after the trade to ensure that its CSDP has committed to settle in respect of controlled accounts.
- Assume the obligation to settle by 16h00 on the 2nd business day after the trade date if a non-controlled client is unable to settle.
- By 18h00 on the 2nd business day after trade date to ensure that the CSDP of a member commits to settle any transactions in respect of the member’s non-controlled clients assumed in terms of 6 above.
