Bond ETP Securities Settlement Process

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Questions and Answers

What initial step does the Settlement Authority take upon receiving notification from a member unable to settle a transaction?

Revoke the transaction entirely.

Proceed with alternative settlement options.

Notify all involved members immediately.

Assess if exceptional circumstances exist. (correct)

What is included in the list of Bond ETP settlements obtained by the Settlement Authority?

Only the failed trade leg.

Settlements from previous dates.

Only the original transaction details.

Both the failed trade leg and the opposite trade leg. (correct)

What instruction is given to the failing and non-failing members regarding the re-booking of transactions?

Re-book at the original yield. (correct)

Cancel the original transaction.

Re-book at a different yield.

Notify the Settlement Authority of a new transaction.

Under which circumstances will the Settlement Authority roll the settlement to another revised settlement date?

If exceptional circumstances exist again. Signup and view all the answers

What happens if the Settlement Authority determines the settlement cannot occur on the further revised settlement date?

The JSE considers if the member is in default. Signup and view all the answers

Which of the following is NOT a responsibility of the CSD in the settlement process?

Rolling settlements on behalf of members. Signup and view all the answers

What should the failing member do after being notified about the rolling of the settlement?

Rebook the transaction for the new date. Signup and view all the answers

What must failing and non-failing members do concerning the ETP fails management trading system?

Report the transaction after re-booking. Signup and view all the answers

Which action may the Settlement Authority not take regarding Bond ETP securities?

Settle transactions without electronic means Signup and view all the answers

What is the latest time a member can ensure their CSDP can commit to settling a Bond ETP transaction?

17h30 on the business day preceding the settlement date Signup and view all the answers

If a transaction in Bond ETP securities is unlikely to settle, what must a member do?

Inform the Settlement Authority immediately Signup and view all the answers

What must a member not do on the settlement date regarding their CSD settlement?

Stop payment related to the transaction Signup and view all the answers

Which scenario qualifies for the deferral of settlement of Bond ETP transactions?

Transactions that could cause systemic risk Signup and view all the answers

What does 'rolling of settlement procedures' refer to in the context of Bond ETP securities?

Extending deadlines and managing settlements more flexibly Signup and view all the answers

What is a member's responsibility regarding committed transactions in Bond ETP securities?

To ensure no revocation of CSDP commitment is required Signup and view all the answers

What is the timeframe for settlement following a trade in Bond ETP securities?

Three business days after trade date Signup and view all the answers

What must a member do if their CSDP fails to commit to settle a sale transaction in Bond ETP securities by 13h15 on the settlement date?

Take necessary steps to ensure recommitment by 15h00. Signup and view all the answers

What action does the Settlement Authority take upon receiving a notification from a member regarding a failure to settle?

Determine whether to roll the relevant transaction to a later date. Signup and view all the answers

Under which circumstances may a member’s CSDP retract its commitment to settle a sale transaction?

There is a dependency on the settlement of another transaction. Signup and view all the answers

What is the final deadline by which a member's CSDP must ensure settlement recommitment on the settlement date?

15h00 Signup and view all the answers

What must a member do to cover the uncommitted sale transaction if the necessary steps are not taken by 14h00?

Borrow the relevant securities from National Treasury. Signup and view all the answers

What happens if a member notifies the Settlement Authority after the deadline of 18h00 on the business day before the settlement date?

The member may face penalties for late notification. Signup and view all the answers

What time is critical for a member's CSDP to confirm commitment on the settlement date to avoid transaction retraction?

13h15 Signup and view all the answers

Why might a member experience difficulties in settling a transaction on the settlement date?

If the CSDP of the counterparty has not committed to settle another dependent transaction. Signup and view all the answers

What is one of the primary functions of the JSE Clearing and Settlement division in relation to Bond ETP securities?

Issuing fines for transgressions of Rules and Directives Signup and view all the answers

Which principle defines the manner in which Bond ETP securities are to be settled?

Trade by trade, between the buyer and the seller Signup and view all the answers

What role does the Settlement Authority play in relation to the ETP fails management trading system?

It manages the execution of trades and associated risks Signup and view all the answers

What is the lender of last resort function in relation to Bond ETP securities?

Serving as a backup for SARB and Primary Dealers Signup and view all the answers

How are transactions in Bond ETP securities deemed contractually due for settlement?

A prescribed number of days after the trade date Signup and view all the answers

What is the maximum time a member has to ensure their CSDP commits to settling Bond ETP securities?

18h00 on the business day preceding the settlement date Signup and view all the answers

Which of the following actions is permissible for the Settlement Authority if a transaction is unlikely to settle?

Deferring the settlement with notification to the CSD Signup and view all the answers

What must a member do if they suspect a transaction in Bond ETP securities will not settle?

Notify the Settlement Authority without delay Signup and view all the answers

What is required of a member concerning the settlement of Bond ETP securities on the settlement date?

They cannot instruct their CSDP to revoke settlement commitment Signup and view all the answers

What should not occur on the settlement date regarding CSD settlement?

Stopping payment by members Signup and view all the answers

What timeframe follows a trade in Bond ETP securities for settlement?

Three business days after the trade date Signup and view all the answers

Under what condition can a member instruct their CSDP to retract its commitment to settle a transaction?

If the member receives a direct instruction from the Settlement Authority Signup and view all the answers

What does the Settlement Authority require from members concerning transactions that are likely to cause systemic risk?

Notification of the deferral to the CSD Signup and view all the answers

What process does the Settlement Authority follow after receiving a notification from a member about their inability to settle?

Assess the possibility of rolling the settlement based on available information Signup and view all the answers

What happens to the failing and non-failing members once the Settlement Authority decides to roll the settlement?

They are instructed to re-book the original transaction at the original yield Signup and view all the answers

What role does the CSD play in the rolling of settlement for Bond ETP securities?

They provide a list of failed trades to the relevant parties Signup and view all the answers

If settlement does not occur on the revised settlement date, what might happen next according to the procedures?

The settlement may roll to another revised date under exceptional circumstances Signup and view all the answers

What are the possible consequences if the Settlement Authority determines that the settlement will not take place on the further revised settlement date?

The JSE will evaluate whether the member is in default and apply default rules Signup and view all the answers

Which aspect of the settlement process may lead the Settlement Authority to decide on rolling the settlement to a later date?

Determination of whether exceptional circumstances are present Signup and view all the answers

In what manner is the transaction reported to the ETP fails management trading system?

By both parties following the initial notification of settlement being rolled Signup and view all the answers

What should the Settlement Authority consider when deciding if a member is in default?

The inability to settle on the further revised settlement date Signup and view all the answers

What is the latest time by which a member must ensure their CSDP is in a position to recommit to settle the transaction on the settlement date?

15h00 Signup and view all the answers

Under what condition might a member's CSDP be required to retract their commitment to settle a sale transaction?

If a dependency on another transaction prevents commitment. Signup and view all the answers

What must a member do if their CSDP has not committed to settle by 13h15 on the settlement date?

Take all necessary steps to ensure recommitment. Signup and view all the answers

Which of the following actions must be taken by 14h00 to ensure coverage of the uncommitted sale transaction?

Take necessary steps to cover the transaction. Signup and view all the answers

What action does the Settlement Authority take if a member notifies them after the deadline of 18h00 on the business day before the settlement date?

Determine if the settlement will be rolled to a later date. Signup and view all the answers

What time does a member's CSDP need to commit to settle by to avoid having their transaction retracted?

15h00 Signup and view all the answers

What is the first step a member should take if their CSDP is unable to commit to settle by 18h00 on the previous business day?

Immediately notify the Settlement Authority. Signup and view all the answers

What is the consequence if the necessary actions are not taken by 14h00 regarding a sale transaction?

The Settlement Authority may instruct to borrow securities. Signup and view all the answers

What determines when mark-to-market adjustments to initial margin must be paid by a member?

Marking-to-market results determined by JSE discretion. Signup and view all the answers

What is the purpose of the initial margin paid by a member into the CPD margin account?

To cover potential losses from member defaults. Signup and view all the answers

What timeframe is specified for a member to pay any amount due as per mark-to-market calculations?

No later than 12h00 on the next business day. Signup and view all the answers

What action may the JSE take if a member fails to pay the initial margin or adjustments?

Deem it an act of default. Signup and view all the answers

How often does the JSE normally calculate mark-to-market adjustments to initial margin?

Daily basis under normal circumstances. Signup and view all the answers

Which of the following is a condition for a member to withdraw excess funds from their CPD margin account?

It requires approval from the Settlement Authority. Signup and view all the answers

What may the Settlement Authority charge a member for?

Fees associated with the settlement of Bond ETP securities. Signup and view all the answers

What is the latest timeframe for a member to settle fees charged by the Settlement Authority?

Within five business days of notification. Signup and view all the answers

Study Notes

Rolling of Settlement Procedures

Settlement Authority assesses member notifications regarding inability to settle Bond ETP securities transactions on settlement date.
Exceptional circumstances are evaluated to determine if settlement can be rolled to a later date when a member is unable to settle.
A list of affected Bond ETP settlements is compiled, including both failed trade legs and their opposites.

Communication and Re-booking

Failing and non-failing members are notified of revisions to settlement dates decided by the Settlement Authority.
Members are instructed to re-book original transactions at original yields for revised settlement dates.

Reporting and Further Failures

Transactions must be reported to the ETP fails management trading system.
If settlement fails again on the new date, the Settlement Authority may consider further rolling under exceptional circumstances.

Default Considerations

Should further rolling not be possible, the JSE evaluates member defaults and handles transactions according to default rules.
A CSDP’s commitment to settle is confirmed by 8h30 on the settlement date.

Notification and Compliance Steps

Members unable to ensure CSDP commitment by 18h00 the business day before must notify the Settlement Authority immediately.
Dependencies on other transaction settlements may prevent CSDPs from committing.

Deadline and Compliance Requirements

By 13h15 on settlement date, if a member's CSDP hasn’t committed, necessary actions must be taken to secure settlement by 15h00.
If not resolved, members may be instructed to borrow securities from National Treasury to cover transactions.

Facilitating Settlement Actions

Settlement Authority may facilitate settlements through rolling procedures or default processes as required.
Deferrals of settlements may occur if they pose systemic risks, extending timeframes per Bond ETP Rules and Directives.

Electronic Settlement Principles

All Bond ETP transactions are settled electronically via the CSD.
Commitments by members' CSDPs must occur by 18h00 on the business day before settlement.

Member Settlement Obligations

Members must ensure transactions are likely to settle and notify the Settlement Authority of any unlikely settlements.
Payments related to CSD settlements cannot be stopped on the settlement date.

CSDP Instructions

Members may not revoke CSDP commitments unless directed by the Settlement Authority.
Arrangements should be made by 17h30 the day before settlement to ensure CSDP commitment by 18h00.

Rolling Settlement Procedures

If a member cannot settle a Bond ETP transaction on the due date, the Settlement Authority assesses if exceptional circumstances exist for rolling the settlement.
The decision to roll a settlement includes determining the member's ability to fulfill the transaction on a later date.

Execution of Rolling Settlement

A list of failed Bond ETP settlements is obtained from the Central Securities Depository (CSD), including the failed trade leg and its opposite.
Both failing and non-failing members are notified of the revised settlement date decided by the Settlement Authority.
Members must re-book the original transaction at its original yield for the new settlement date.
Transactions must be reported to the ETP fails management trading system.

Further Settlement Extensions

Should settlement fail again on the new date, the Settlement Authority may roll it to another date under exceptional circumstances.
If further settlement is deemed unachievable, the Johannesburg Stock Exchange (JSE) may declare the member in default.

Settlement Management by JSE

The Bonds Clearing and Settlement team acts as the Settlement Authority under JSE Rules and Directives.
Responsibilities include ensuring settlement assurance, monitoring bond settlements, and managing systemic risks.

Key Functions of JSE Clearing and Settlement Division

Ensuring trade settlement in the ETP Market.
Acting as lender of last resort for various members and institutions.
Monitoring and balancing daily margin maintenance levels for Primary Dealers.

Settlement Principles for ETP Securities

Transactions in Bond ETP securities are settled trade by trade, directly between buyers and sellers.
Settlements occur on a rolling, contractual basis, due within a prescribed number of days post-trade date.

Member Responsibilities for Settlement

Members must notify the Settlement Authority if a transaction is unlikely to settle on the settled date.
Members cannot stop payments on settlement day and must ensure their CSDP commits to the settlement by a specified time.
Uncommitted transactions must be resolved quickly, with various deadlines for commitment and coverage set throughout the settlement date.

Mark-to-Market Process

The JSE may mark-to-market unsettled Bond ETP transactions at any time based on market conditions or member-specific needs.

Margin Requirements

Members must deposit an initial margin into their CPD margin accounts based on potential settlement risks calculated by the JSE.
Regular mark-to-market adjustments are made, with payments due by noon the following business day after calculation.

Fees and Penalties

The Settlement Authority may charge fees associated with the settlement of Bond ETP securities, payable within five business days of notification.
Failure to meet margin obligations may result in default status for the member.

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Description

This quiz covers the procedures involved in rolling settlements for Bond ETP securities. It explores the conditions under which a member can notify the Settlement Authority and the criteria used to assess exceptional circumstances. Test your understanding of the settlement process and the implications of transaction delays.