Settlements 2

Question 1

What is a member required to do if a client, at any stage, advises the member that it is unable to settle or the member otherwise becomes aware that the client is not able to settle?

Answer 1

1. Endeavour to enter into an arrangement to ensure settlement.
2. If unable to do so, immediately notify the Settlement Authority.

Question 2

Having notified the SA that a client is unable to settle and the SA is able to procure settlement of the transaction by means of borrowing equity securities or funds, as the case may be, what is a member required to do by no later than close of business on the next business day?

Answer 2

1. In respect of a sale transaction, buy such securities either for the account of the relevant client or for the member’s own account; or
2. In respect of a purchase transaction, sell such securities either for the account of the relevant client or for the member’s own account;
   in order to ensure the return of the securities or funds to the Settlement Authority.

Question 3

What is a member specifically prohibited from using when complying with settlement obligations?

Answer 3

A member must not use a client’s equity securities to settle the obligations of:-
1. Another client or
2. A proprietary position

Question 4

On which unsettled transactions may the JSE require a member to provide margins before 12h00 on the 2nd business day after the trade?

Answer 4

1. In respect of a non-controlled client transaction where, by end of day on the first business day after the trade date, the CSDP of the non-controlled client has not committed to settle the transaction on behalf of that client.
2. In respect of a controlled client sale transaction where, by end of day on the first business day after the trade date, the controlled client :
   a. does not have sufficient equity securities in the custody of the member or the member’s CSP for the transaction to settle on settlement date;
   b. has not entered into a securities borrowing arrangement to facilitate settlement of the sale on settlement date, as reflected on the BDA system; or
   c. has not concluded a purchase transaction which is due to settle on or before the settlement date of the sale and which will provide sufficient equity securities for the sale to settle on settlement date.
3. In respect of a controlled client purchase transaction where, by end of day on the first business day after the trade date, the controlled client :
   a. does not have sufficient funds in the custody of the member or the member’s CSP for the transaction to settle on settlement date; or
   b. has not concluded a sale transaction which is due to settle on or before the settlement date of the purchase and which will provide sufficient funds for the purchase to settle on settlement date.
4. In respect of a sale transaction for the member’s own account where, by end of day on the first business day after the trade date, the member :
   a. does not have sufficient equity securities available for the transaction to settle on settlement date;
   b. has not entered into a securities borrowing arrangement to facilitate settlement of the sale on settlement date, as reflected on the BDA system; or
   c. has not concluded a purchase transaction which is due to settle on or before the settlement date of the sale and which will provide sufficient equity securities for the sale to settle on settlement date.
5. In respect of a purchase transaction for the member’s own account where the member has not concluded a sale transaction due to settle on the settlement date of the purchase which will provide sufficient funds for the purchase to settle on settlement date.

Question 5

What are the principles in terms of which a failed trade will be dealt with?

Answer 5

1. The Settlement Authority will match a failed trade against an opposite transaction or transactions represented by one or more contract notes, being mindful of any apparent implications for the parties concerned.
2. The Settlement Authority will advise the non-failing member that its transaction has been selected in terms of rule 10.110.1.1.
3. If the non-failing party is a client, the Settlement Authority will transfer the original transaction of the non-failing party to a proprietary account of the non-failing member.
4. The Settlement Authority will book an opposite settlement transaction through Strate between the failing member and the non-failing member for the same quantity and at the same price as the non-failing party’s original transaction.

Question 6

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?

Answer 6

The client who caused a failed trade.