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?

    <p>If exceptional circumstances exist again.</p> Signup and view all the answers

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

    <p>The JSE considers if the member is in default.</p> Signup and view all the answers

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

    <p>Rolling settlements on behalf of members.</p> Signup and view all the answers

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

    <p>Rebook the transaction for the new date.</p> Signup and view all the answers

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

    <p>Report the transaction after re-booking.</p> Signup and view all the answers

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

    <p>Settle transactions without electronic means</p> 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?

    <p>17h30 on the business day preceding the settlement date</p> Signup and view all the answers

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

    <p>Inform the Settlement Authority immediately</p> Signup and view all the answers

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

    <p>Stop payment related to the transaction</p> Signup and view all the answers

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

    <p>Transactions that could cause systemic risk</p> Signup and view all the answers

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

    <p>Extending deadlines and managing settlements more flexibly</p> Signup and view all the answers

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

    <p>To ensure no revocation of CSDP commitment is required</p> Signup and view all the answers

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

    <p>Three business days after trade date</p> 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?

    <p>Take necessary steps to ensure recommitment by 15h00.</p> 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?

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

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

    <p>There is a dependency on the settlement of another transaction.</p> 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?

    <p>15h00</p> 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?

    <p>Borrow the relevant securities from National Treasury.</p> 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?

    <p>The member may face penalties for late notification.</p> 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?

    <p>13h15</p> Signup and view all the answers

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

    <p>If the CSDP of the counterparty has not committed to settle another dependent transaction.</p> 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?

    <p>Issuing fines for transgressions of Rules and Directives</p> Signup and view all the answers

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

    <p>Trade by trade, between the buyer and the seller</p> Signup and view all the answers

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

    <p>It manages the execution of trades and associated risks</p> Signup and view all the answers

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

    <p>Serving as a backup for SARB and Primary Dealers</p> Signup and view all the answers

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

    <p>A prescribed number of days after the trade date</p> Signup and view all the answers

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

    <p>18h00 on the business day preceding the settlement date</p> Signup and view all the answers

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

    <p>Deferring the settlement with notification to the CSD</p> Signup and view all the answers

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

    <p>Notify the Settlement Authority without delay</p> Signup and view all the answers

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

    <p>They cannot instruct their CSDP to revoke settlement commitment</p> Signup and view all the answers

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

    <p>Stopping payment by members</p> Signup and view all the answers

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

    <p>Three business days after the trade date</p> Signup and view all the answers

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

    <p>If the member receives a direct instruction from the Settlement Authority</p> Signup and view all the answers

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

    <p>Notification of the deferral to the CSD</p> 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?

    <p>Assess the possibility of rolling the settlement based on available information</p> Signup and view all the answers

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

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

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

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

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

    <p>The settlement may roll to another revised date under exceptional circumstances</p> 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?

    <p>The JSE will evaluate whether the member is in default and apply default rules</p> 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?

    <p>Determination of whether exceptional circumstances are present</p> Signup and view all the answers

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

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

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

    <p>The inability to settle on the further revised settlement date</p> 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?

    <p>15h00</p> 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?

    <p>If a dependency on another transaction prevents commitment.</p> 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?

    <p>Take all necessary steps to ensure recommitment.</p> Signup and view all the answers

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

    <p>Take necessary steps to cover the transaction.</p> 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?

    <p>Determine if the settlement will be rolled to a later date.</p> 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?

    <p>15h00</p> 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?

    <p>Immediately notify the Settlement Authority.</p> Signup and view all the answers

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

    <p>The Settlement Authority may instruct to borrow securities.</p> Signup and view all the answers

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

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

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

    <p>To cover potential losses from member defaults.</p> Signup and view all the answers

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

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

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

    <p>Deem it an act of default.</p> Signup and view all the answers

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

    <p>Daily basis under normal circumstances.</p> 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?

    <p>It requires approval from the Settlement Authority.</p> Signup and view all the answers

    What may the Settlement Authority charge a member for?

    <p>Fees associated with the settlement of Bond ETP securities.</p> Signup and view all the answers

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

    <p>Within five business days of notification.</p> 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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    Settlement of Bonds ETP Securities PDF

    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.

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