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Questions and Answers
What determines the minimum capital a trading member must maintain?
What determines the minimum capital a trading member must maintain?
Which of the following is NOT included in the capital adequacy requirements for trading members?
Which of the following is NOT included in the capital adequacy requirements for trading members?
What must a foreign parent's written confirmation to the JSE include?
What must a foreign parent's written confirmation to the JSE include?
What is a defining feature of the inter-dealer broker's role in the JSE listed bonds market?
What is a defining feature of the inter-dealer broker's role in the JSE listed bonds market?
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Which type of trading member is exempt from the monthly capital adequacy returns to the Director: Market Regulation?
Which type of trading member is exempt from the monthly capital adequacy returns to the Director: Market Regulation?
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In the event of a foreign bank having a local branch, which regulation must they comply with?
In the event of a foreign bank having a local branch, which regulation must they comply with?
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What is the primary purpose of the JSE IRC Rules and Directives?
What is the primary purpose of the JSE IRC Rules and Directives?
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Which of the following requirements must an inter-dealer broker meet to maintain their status?
Which of the following requirements must an inter-dealer broker meet to maintain their status?
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What is restricted for an inter-dealer broker when transacting in bonds on a matched principal basis?
What is restricted for an inter-dealer broker when transacting in bonds on a matched principal basis?
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What does the thirteen weeks fixed operating costs requirement pertain to?
What does the thirteen weeks fixed operating costs requirement pertain to?
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Who must adhere to the JSE IRC Rules and Directives?
Who must adhere to the JSE IRC Rules and Directives?
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Which of the following accurately describes the limitations placed on inter-dealer brokers by the JSE?
Which of the following accurately describes the limitations placed on inter-dealer brokers by the JSE?
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For a trading member that does not trade in bonds, what must their assets exceed?
For a trading member that does not trade in bonds, what must their assets exceed?
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What condition is attached to every transaction in IRC securities by a trading member?
What condition is attached to every transaction in IRC securities by a trading member?
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What does the term 'matched principal basis' refer to in the context of inter-dealer brokers?
What does the term 'matched principal basis' refer to in the context of inter-dealer brokers?
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What could happen to trading members exempt from IRC Rules regarding capital adequacy?
What could happen to trading members exempt from IRC Rules regarding capital adequacy?
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What was the outcome of integrating the Yield-X and BESA markets?
What was the outcome of integrating the Yield-X and BESA markets?
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What role can the JSE fulfill regarding clearing operations?
What role can the JSE fulfill regarding clearing operations?
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What was the main intent behind the transitional provisions established by the JSE?
What was the main intent behind the transitional provisions established by the JSE?
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Which market rules currently form the foundation for the integrated markets after the merger?
Which market rules currently form the foundation for the integrated markets after the merger?
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What is a core objective of the JSE in relation to its operation as stated in the provisions?
What is a core objective of the JSE in relation to its operation as stated in the provisions?
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What is the primary purpose of the Compensation Funds established by the JSE?
What is the primary purpose of the Compensation Funds established by the JSE?
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Who is responsible for determining the levy payable by trading members to the Compensation Funds?
Who is responsible for determining the levy payable by trading members to the Compensation Funds?
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What is a requirement for a trading member to enter into a clearing agreement?
What is a requirement for a trading member to enter into a clearing agreement?
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What does the income of the Compensation Funds primarily consist of?
What does the income of the Compensation Funds primarily consist of?
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What role do the trustees have concerning the Compensation Funds?
What role do the trustees have concerning the Compensation Funds?
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In what capacity can a trading member operate in relation to clients?
In what capacity can a trading member operate in relation to clients?
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What stipulations can the JSE prescribe regarding the settlement systems?
What stipulations can the JSE prescribe regarding the settlement systems?
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What kind of liabilities can claims from the Compensation Funds cover?
What kind of liabilities can claims from the Compensation Funds cover?
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What restrictions apply to a trading member operating as an inter-dealer broker (IDB) when arranging transactions in JSE listed bonds?
What restrictions apply to a trading member operating as an inter-dealer broker (IDB) when arranging transactions in JSE listed bonds?
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When transacting on a matched principal basis, what condition must be adhered to by an inter-dealer broker?
When transacting on a matched principal basis, what condition must be adhered to by an inter-dealer broker?
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What must an inter-dealer broker provide to any trading member upon request during a matched principal transaction?
What must an inter-dealer broker provide to any trading member upon request during a matched principal transaction?
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Which of the following statements about inter-dealer brokers is false?
Which of the following statements about inter-dealer brokers is false?
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Which of the following best describes the activity limitations imposed on inter-dealer brokers in the JSE listed bonds market?
Which of the following best describes the activity limitations imposed on inter-dealer brokers in the JSE listed bonds market?
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What is the maximum amount that can be paid out of the Compensation Funds for claims arising from transactions in IRC securities?
What is the maximum amount that can be paid out of the Compensation Funds for claims arising from transactions in IRC securities?
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Who is allowed to impose a levy on trading members for the use of Compensation Funds?
Who is allowed to impose a levy on trading members for the use of Compensation Funds?
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Which of the following best describes the role of trustees in the Compensation Funds?
Which of the following best describes the role of trustees in the Compensation Funds?
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What conditions must a trading member meet to operate in a clearing agreement?
What conditions must a trading member meet to operate in a clearing agreement?
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How does a trading member recover the levy imposed by the Compensation Funds?
How does a trading member recover the levy imposed by the Compensation Funds?
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What is primarily included in the income of the Compensation Funds?
What is primarily included in the income of the Compensation Funds?
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What procedural authority does the JSE have concerning settlement systems?
What procedural authority does the JSE have concerning settlement systems?
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What limitation exists for claims from the Compensation Funds against a defaulting trading member?
What limitation exists for claims from the Compensation Funds against a defaulting trading member?
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What is required of the foreign parent company of a local branch regarding compliance with capital adequacy requirements?
What is required of the foreign parent company of a local branch regarding compliance with capital adequacy requirements?
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Which of the following components is NOT part of the total capital requirements for a trading member?
Which of the following components is NOT part of the total capital requirements for a trading member?
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For a trading member that solely trades derivative instruments for its own account, what is required regarding its assets and liabilities?
For a trading member that solely trades derivative instruments for its own account, what is required regarding its assets and liabilities?
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What can exempt a trading member from the monthly capital adequacy returns to the Director: Market Regulation?
What can exempt a trading member from the monthly capital adequacy returns to the Director: Market Regulation?
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What does the requirement for thirteen weeks fixed operating costs relate to for a trading member that is an external company?
What does the requirement for thirteen weeks fixed operating costs relate to for a trading member that is an external company?
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What must a trading member that is exempt from IRC Rules ensure regarding its financial standing?
What must a trading member that is exempt from IRC Rules ensure regarding its financial standing?
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Which regulatory framework must external trading members, particularly branches of foreign banks, comply with if they are exempt from IRC Rules?
Which regulatory framework must external trading members, particularly branches of foreign banks, comply with if they are exempt from IRC Rules?
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What is the main condition a trading member must satisfy concerning their own funds at all times?
What is the main condition a trading member must satisfy concerning their own funds at all times?
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What must a trading member ensure when conducting transactions in IRC securities?
What must a trading member ensure when conducting transactions in IRC securities?
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Which of the following defines the role of the clearing house appointed by the JSE?
Which of the following defines the role of the clearing house appointed by the JSE?
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What significant organizational change occurred to the Yield-X and BESA markets?
What significant organizational change occurred to the Yield-X and BESA markets?
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Who must be informed of any decisions made under the JSE IRC Rules?
Who must be informed of any decisions made under the JSE IRC Rules?
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What is a primary objective of the JSE as indicated in its framework?
What is a primary objective of the JSE as indicated in its framework?
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What is expected of clients interacting with trading members regarding the JSE Rules?
What is expected of clients interacting with trading members regarding the JSE Rules?
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Which entity is responsible for conducting oversight on transactions within IRC securities?
Which entity is responsible for conducting oversight on transactions within IRC securities?
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What adaptation was necessary for the merging of Yield-X and BESA into the JSE?
What adaptation was necessary for the merging of Yield-X and BESA into the JSE?
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Study Notes
Capital Adequacy Requirements
- Trading members must have sufficient funds to cover various risks, including initial capital, operating costs, position risk, counterparty risk, large exposure risk, and foreign exchange risk.
- External companies operating as trading members must meet specific requirements with regard to their local branch, including confirmation of compliance by the foreign parent company.
- Trading members that are branches of foreign banks are exempt from the capital adequacy requirements of the IRC Rules and must comply with the requirements of the Banks Act, 1990.
- Trading members that do not trade in bonds and only trade in derivative instruments for their own account are exempt from the IRC Rules, but must ensure their assets exceed their liabilities.
- Trading members that are authorized users of another recognized exchange are exempt from the IRC Rules and must comply with the capital adequacy requirements of that exchange.
The Rules and Directives
- The purpose of the JSE Interest Rate and Currency Derivatives (IRC) Rules and Directives is to establish and regulate fair and efficient markets.
- These rules and directives are binding upon all trading members, officers, employees, clients, and other parties involved in transactions with trading members.
- Every transaction in IRC securities must be entered into subject to the provisions of the Act, these Rules, and the Directives.
Clearing House
- The JSE may appoint a clearing house or a central counterparty (CCP) to clear and settle trades in IRC securities.
Transitional Provisions
- The Yield-X and BESA markets have been integrated.
- The integrated rules and directives are now known as the JSE interest rate and currency ("IRC") rules and directives.
- The transitional provisions facilitate the integration of the Yield-X and BESA rules and directives.
Compensation Funds
- The JSE may establish and maintain Compensation Funds to cover claims arising from the default of a trading member.
- The Compensation Funds are administered by trustees.
- Trading members pay a levy to the Compensation Funds on transactions in IRC securities.
Settlement System
- The JSE may operate or contract with a third party to operate settlement systems.
- The JSE can prescribe procedures and requirements for trading members using these systems, including fees payable.
General Membership Requirements
- All trading members must comply with the requirements outlined in the rules and determined by the JSE.
- Trading members are categorized based on their authorized activities.
- Trading members may be clearing members and may trade for and on behalf of clients.
- Inter-dealer brokers (IDBs) are a sub-category of trading members that are subject to specific rules, including limitations on their activities and disclosure requirements.
- The JSE may impose restrictions or conditions on trading members in relation to the securities services they are authorized to provide.
- IDBs must meet specific requirements to maintain their status, including limitations on their business activities, restrictions on proprietary positions, and disclosure obligations.
Capital Adequacy Requirements
- Trading members must maintain own funds equal to the greater of the initial capital requirement or 13 weeks' fixed operating costs, plus various risk requirements.
- For trading members who are external companies (excluding branches of foreign banks), the own funds requirement applies to the local branch, the foreign parent must confirm compliance with similar capital adequacy requirements in their jurisdiction, and the 13 weeks fixed operating costs requirement relates only to the local branch.
- Branches of foreign banks are exempt from the capital adequacy return requirements and instead comply with the Banks Act, 1990 and related regulations.
- Trading members who trade solely in derivative instruments listed on the JSE for their own account and are exempt from capital adequacy returns are required to maintain assets (excluding goodwill and intangible assets) exceeding their liabilities (excluding subordinated loans).
- Authorized users of other exchanges who are exempt from capital adequacy returns must comply with the capital adequacy requirements of those exchanges.
Purpose of the JSE IRC Rules and Directives
- Purpose of the JSE IRC Rules and Directives is to ensure fair and efficient markets and orderly business practices, in accordance with the JSE's Memorandum and Articles of Association and the applicable Act.
Binding Nature of the Rules and Directives
- Rules and Directives are binding on all trading members, officers, employees, clients of trading members, and other persons who transact with trading members in the course of their business.
- The rules also apply to CSDPs acting on behalf of trading members and their clients.
- The controlling body of the JSE will notify trading members of any decisions or determinations made under these rules.
Transactions Subject to the Rules and Directives
- All transactions in IRC securities entered into by a trading member must be subject to the provisions of the Act, the Rules, and the Directives.
Clearing House Appointment
- The JSE may appoint a clearing house or a clearing house and central counterparty (CCP) to clear and settle trades in IRC securities in accordance with the Rules.
Transitional Provisions
- The JSE integrated its Yield-X and BESA markets, resulting in the joining of their respective rules and directives and membership.
- The integrated rules and directives are based on the Yield-X rules, with appropriate amendments, and have been renamed the JSE Interest Rate and Currency (IRC) Rules and Directives.
Compensation Funds
- The JSE is empowered to establish and maintain Compensation Funds for paying claims arising from liabilities of defaulting trading members.
- Payment from the Funds is limited to claims arising from transactions in IRC securities with or on behalf of other persons and other liabilities specified in the rules.
- The JSE determines a levy payable by trading members on IRC securities transactions.
- Trustees of the Compensation Funds acquire, incur, and administer the assets and liabilities of the Funds.
- Income of the Compensation Funds vests in the trustees and is administered by them.
Settlement System
- The JSE may operate or contract with a third party to operate one or more settlement systems.
- The JSE may prescribe procedures and requirements for trading members using the settlement systems and determine the fees payable for such use.
Membership Requirements
- To qualify as a trading member, an applicant must comply with the requirements outlined in the rules and any additional requirements determined by the JSE. -Trading members are categorized and registered in a register maintained by the JSE.
Categories of Membership
- A trading member may only enter into a clearing agreement with one clearing member.
- Trading members can be clearing members and trade for and on behalf of clients.
- Inter-dealer brokers (IDBs) are a subcategory of trading members subject to specific rules and cannot be clearing members.
Specific Requirements for Inter-Dealer Brokers (IDBs)
- IDBs must limit their JSE listed bond business to arranging transactions between counterparties on a name give-up basis or trading with or on behalf of other parties on a matched principal basis.
- IDBs cannot take a proprietary position against another trading member or client when trading on a matched principal basis.
- IDBs must provide a list of clients who may be involved in matched principal transactions upon request.
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Description
Test your understanding of capital adequacy requirements for trading members. This quiz covers various risks that members must address, exemptions, and compliance criteria based on their operations and affiliations. Gain insights into how these regulations impact trading activities.
