Client Trading Agreements and Margin Payments
108 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the minimum total cash amount a trading member can receive to avoid avoiding compliance with the cash rule?

  • R1 000
  • R5 000 (correct)
  • R10 000
  • R7 500

    • What must a non-resident client do before a trading member can facilitate trading?

  • Provide proof of residency in their home country.
  • Open a non-resident account at a foreign bank.
  • Register with the South African Reserve Bank.
  • Open a non-resident account at an authorised bank. (correct)

    • What is the initial margin for a non-resident client based on?

  • International market standards.
  • The cash available in the client's bank account.
  • The trading volume of the securities.
  • The margin assigned by the trading member. (correct)

    • Which regulation must a trading member comply with regarding a non-resident client's payments?

    <p>Exchange Control Regulations determined by the South African Reserve Bank.</p> Signup and view all the answers

    What does the confirmation in the SWIFT non-resident account notification confirm?

    <p>The net settlement amounts to be paid or received.</p> Signup and view all the answers

    What is the purpose of the non-resident account opened by the client?

    <p>To facilitate trading in IRC securities.</p> Signup and view all the answers

    What implication does the trading member face regarding margins for non-resident clients?

    <p>They cannot hold any retained or additional margins.</p> Signup and view all the answers

    How is the initial margin for a non-resident client adjusted?

    <p>By the margin category assigned by the trading member.</p> Signup and view all the answers

    What must a client agreement for bond holdings include?

    <p>Minimum requirements as set out in Directive DD</p> Signup and view all the answers

    Who can withdraw or transfer a client's bonds from a custody account?

    <p>Only suitably authorised persons</p> Signup and view all the answers

    Under what condition can a trading member have custody of non-resident clients' bond holdings?

    <p>If they are an authorised bank</p> Signup and view all the answers

    What information is NOT required when effecting a pledge of uncertificated bonds?

    <p>The location of the bond issuance</p> Signup and view all the answers

    What must a trading member do when granting margin relaxation exceeding two business days?

    <p>Inform the client in writing</p> Signup and view all the answers

    What is the maximum cash deposit amount a trading member can accept?

    <p>R5 000</p> Signup and view all the answers

    If no interest rate is specified for a loan due to margin relaxation, which rate applies?

    <p>The trading member's customary rate or prescribed rate if none exists</p> Signup and view all the answers

    What is required for a pledge of bonds to be valid?

    <p>A written agreement signed by all parties involved</p> Signup and view all the answers

    What must a trading member do with interest received from JSE Clear related to a non-resident client's positions?

    <p>Transfer the interest to the non-resident client's account on the second business day.</p> Signup and view all the answers

    In the context of offsetting amounts, which of the following scenarios is prohibited for a trading member?

    <p>Offsetting amounts due to it from a non-resident client against amounts it owes another non-resident client.</p> Signup and view all the answers

    What is the final step for a trading member concerning SWIFT notifications related to a non-resident account?

    <p>Pay the required amount by midday on the next business day after the notification.</p> Signup and view all the answers

    What should be confirmed before a clearing member or JSE Clear offsets amounts due?

    <p>That no margins or other monies of a non-resident client are being held.</p> Signup and view all the answers

    Which of the following outlines a custody agreement condition for trading members handling non-resident client funds?

    <p>Clearing members must pay all received amounts directly to non-resident clients without conditions.</p> Signup and view all the answers

    What is required for a trading member regarding the additional margin held on behalf of a client?

    <p>It must be kept in a separate bank account.</p> Signup and view all the answers

    How often must a trading member reconcile its client holdings records for bonds?

    <p>Weekly</p> Signup and view all the answers

    What must a trading member do if discrepancies arise in their reconciliation of client bond holdings?

    <p>Rectify the differences within one day.</p> Signup and view all the answers

    What must the records of a trading member reflect at all times?

    <p>The amounts of additional and retained margins plus other client funds.</p> Signup and view all the answers

    In what manner should client bond holdings be recorded by a trading member?

    <p>In a way that establishes ownership identity readily.</p> Signup and view all the answers

    What separates client custody positions from proprietary positions for a trading member?

    <p>Individual CSDP accounts.</p> Signup and view all the answers

    What actions should a trading member take upon request from the JSE regarding reconciliations?

    <p>Submit a copy of reconciliations and details of reconciling items.</p> Signup and view all the answers

    What type of account must trading members maintain for additional margins not deposited with JSE Clear?

    <p>Segregated client account.</p> Signup and view all the answers

    What must be included in the client agreement regarding bond holdings?

    <p>The minimum requirements as set out in Directive DD</p> Signup and view all the answers

    Which entity can provide custody over non-resident clients' bond holdings?

    <p>Only an authorized bank</p> Signup and view all the answers

    What is the minimum retention period for tape recordings of telephone calls by a trading member?

    <p>14 days</p> Signup and view all the answers

    What is required for a valid entry of pledge in uncertificated bonds?

    <p>A written agreement and an entry in the trading member's accounting records</p> Signup and view all the answers

    Which of the following actions is prohibited for a trading member regarding client assets?

    <p>Using client funds for its own transactions</p> Signup and view all the answers

    How should a trading member handle margin relaxation longer than two business days?

    <p>Immediately notify the client in writing about the loan</p> Signup and view all the answers

    What happens if a trading member accepts cash deposits exceeding R5,000?

    <p>They are committing a regulatory violation</p> Signup and view all the answers

    What is JSE Clear required to do in respect to the assets of clearing members and trading members?

    <p>Keep all assets separate from its own</p> Signup and view all the answers

    Which of the following describes how trading members should manage their clients' IRC securities?

    <p>Maintain clear boundaries between client and member assets</p> Signup and view all the answers

    If no customary interest rate is specified for a margin relaxation loan, which rate applies?

    <p>The Prescribed Rate of Interest Act rate</p> Signup and view all the answers

    What type of consent must parties to prescribed agreements acknowledge regarding telephone calls?

    <p>Irrevocable consent to recordings</p> Signup and view all the answers

    What must a trading member do regarding records of written agreements for pledges or cessions?

    <p>Maintain and keep a record of such agreements</p> Signup and view all the answers

    What constitutes a loan granted by a trading member concerning margin relaxation?

    <p>The amount of margin not paid during the indulgence period</p> Signup and view all the answers

    What can a trading member NOT do with the funds of its clients?

    <p>Allow client funds to finance a third-party transaction</p> Signup and view all the answers

    Which practice is essential for JSE Clear concerning monthly interests on margins?

    <p>Retaining an interest consideration as published</p> Signup and view all the answers

    In relation to client assets, what is the principal requirement for a trading member's operations?

    <p>Maintaining rigorous separation of client assets from its own</p> Signup and view all the answers

    What is the requirement for a trading member when dealing with amounts due to a non-resident client?

    <p>They cannot offset amounts owed to non-resident clients against others' accounts.</p> Signup and view all the answers

    When must a trading member pay interest received from JSE Clear related to a non-resident client's position?

    <p>On the second business day after the end of the month.</p> Signup and view all the answers

    What condition must be met for a clearing member to offset amounts due from a trading member?

    <p>No non-resident client's margins or funds can be held by either party.</p> Signup and view all the answers

    What is a trading member prohibited from doing concerning interest generated from a non-resident client's account?

    <p>Retaining the interest and not paying it to the authorized bank.</p> Signup and view all the answers

    What action must a trading member take regarding amounts in a non-resident client's non-resident account?

    <p>Ensure no amounts due are offset against each other.</p> Signup and view all the answers

    What must a trading member ensure regarding the initial margin for a non-resident client?

    <p>It must be adjusted based on the margin category assigned by the trading member.</p> Signup and view all the answers

    Which of the following statements is true regarding cash amounts that a trading member can receive?

    <p>No more than R5 000 in total cash amounts can be accepted to avoid compliance.</p> Signup and view all the answers

    What accounts must a non-resident client use for trading in IRC securities?

    <p>A non-resident account at an authorised bank.</p> Signup and view all the answers

    Under what condition is a trading member prohibited from holding margins for non-resident clients?

    <p>When any retained or additional margins are in place.</p> Signup and view all the answers

    What is required from the trading member regarding payments and interest for a non-resident client?

    <p>They must comply with Exchange Control Regulations set by the Central Bank.</p> Signup and view all the answers

    What does the confirmation in the SWIFT notification to the authorised bank indicate?

    <p>The net settlement amounts to be paid or received.</p> Signup and view all the answers

    What is the maximum total cash amount that a trading member is allowed to receive from non-resident clients to avoid compliance issues?

    <p>R5 000.</p> Signup and view all the answers

    What is a primary condition for the payment of initial and variation margins by a non-resident client?

    <p>Payments must come from the non-resident account to the trading member's trust account.</p> Signup and view all the answers

    JSE Clear can limit the aggregate exposure arising from the proprietary positions of a clearing member.

    <p>True</p> Signup and view all the answers

    A trading member is required to tape-record all telephonic orders received from clients.

    <p>True</p> Signup and view all the answers

    The minimum retention period for tape recordings of telephone calls by a trading member is three years.

    <p>False</p> Signup and view all the answers

    A trading member must confirm the transactions done on behalf of a client at least once a week.

    <p>False</p> Signup and view all the answers

    Telephone recordings made by JSE and trading members cannot be used as evidence in disciplinary proceedings.

    <p>False</p> Signup and view all the answers

    Records of a trading member must be kept for a period of at least ten years.

    <p>False</p> Signup and view all the answers

    A clearing member may limit the number of futures and option contracts that a trading member can transact at one time.

    <p>True</p> Signup and view all the answers

    The records maintained by a trading member include only their proprietary transactions.

    <p>False</p> Signup and view all the answers

    A trading member is allowed to co-mingle their assets with those of their clients.

    <p>False</p> Signup and view all the answers

    Tape recordings of telephone calls must be retained by a trading member for a minimum of 30 days.

    <p>False</p> Signup and view all the answers

    Clients must be informed that their telephone calls may be recorded as part of the agreement.

    <p>True</p> Signup and view all the answers

    JSE Clear may utilize client funds to operate its own business operations.

    <p>False</p> Signup and view all the answers

    A trading member can retain amounts received on behalf of any person other than retained margin.

    <p>False</p> Signup and view all the answers

    JSE Clear invests margins and other monies in accordance with terms set by its controlling body.

    <p>True</p> Signup and view all the answers

    A trading member can allow clients' assets to finance transactions of another party.

    <p>False</p> Signup and view all the answers

    Any additional margin kept by JSE Clear can be withdrawn at any time by a trading member.

    <p>False</p> Signup and view all the answers

    A trading member is allowed to control holdings of its non-resident clients' bonds as long as it is registered as a financial services provider.

    <p>False</p> Signup and view all the answers

    A pledge of uncertificated bonds can be entered into without a written agreement between the parties involved.

    <p>False</p> Signup and view all the answers

    The customary interest rate applied by a trading member is determined only by the trading member's discretion.

    <p>False</p> Signup and view all the answers

    A trading member can receive an unlimited number of cash deposits as long as each deposit does not exceed R5,000.

    <p>False</p> Signup and view all the answers

    If a trading member gives a client a margin relaxation for three business days, it must inform the client in writing about the loan created.

    <p>True</p> Signup and view all the answers

    Every client agreement regarding bond holdings must explicitly specify the trading member's authority over the client's assets.

    <p>True</p> Signup and view all the answers

    Trading members can independently decide the quantity of uncertificated bonds pledged without being recorded in their accounting records.

    <p>False</p> Signup and view all the answers

    A trading member is allowed to combine client funds with its own proprietary funds in the same bank account.

    <p>False</p> Signup and view all the answers

    Trading members must reconcile their client holdings records for bonds only once a month.

    <p>False</p> Signup and view all the answers

    The entry date for a pledge of uncertificated bonds is irrelevant as long as the transaction is documented.

    <p>False</p> Signup and view all the answers

    The maximum time allowed to rectify discrepancies in client bond holdings between records is one week.

    <p>False</p> Signup and view all the answers

    A trading member's records regarding margin holdings must accurately reflect client agreements at all times.

    <p>True</p> Signup and view all the answers

    Client bond holdings must be recorded in a manner that makes ownership easily identifiable at any time.

    <p>True</p> Signup and view all the answers

    Trading members need not provide reconciliations to the JSE if no discrepancies are found.

    <p>False</p> Signup and view all the answers

    In managing client bonds, trading members must ensure that their proprietary and client custody positions are recorded together.

    <p>False</p> Signup and view all the answers

    Trading members must hold the correct additional margin amount as specified in their agreements with each client.

    <p>True</p> Signup and view all the answers

    A trading member is allowed to off-set amounts due to a non-resident client against another non-resident client's account.

    <p>False</p> Signup and view all the answers

    Interest received by a trading member from JSE Clear must be retained if it is associated with settled bonds positions for non-resident clients.

    <p>False</p> Signup and view all the answers

    The amount of interest that a trading member must pay to the authorised bank for a non-resident client must be equal to the amount received from its clearing member.

    <p>True</p> Signup and view all the answers

    A trading member must pay the interest amount to the authorised bank within two business days after receiving the SWIFT non-resident account notification.

    <p>False</p> Signup and view all the answers

    A trading member can combine margins held for a non-resident client with amounts owed to or by the trading member for other transactions.

    <p>False</p> Signup and view all the answers

    What determines the amount a trading member can recover from a buyer or seller of IRC securities for the levy imposed on transactions?

    <p>The amount specified in the rules of the Compensation Funds</p> Signup and view all the answers

    Which of the following accurately reflects the responsibilities of the trustees of the Compensation Funds?

    <p>They acquire, incur, and manage the assets and liabilities of the Funds</p> Signup and view all the answers

    What procedure must trading members comply with when using the settlement systems operated by the JSE?

    <p>They must adhere to prescribed procedures and requirements set by the JSE</p> Signup and view all the answers

    What can be claimed from the Compensation Funds with respect to liabilities arising from transactions in IRC securities?

    <p>Claims arising from transactions with or on behalf of others by the defaulting trading member</p> Signup and view all the answers

    Which of the following describes the primary source of income for the Compensation Funds?

    <p>Levy contributions paid by trading members</p> Signup and view all the answers

    What is the primary objective of the rules and directives established by the JSE IRC?

    <p>To ensure fair and efficient markets</p> Signup and view all the answers

    Which entities are explicitly bound by the rules and directives of the JSE IRC?

    <p>Trading members and their clients</p> Signup and view all the answers

    What is the role of a clearing house according to the JSE IRC rules?

    <p>To clear and/or settle trades in IRC securities</p> Signup and view all the answers

    What was the effect of integrating the Yield-X and BESA markets?

    <p>It combined the rules and directives of both markets</p> Signup and view all the answers

    Upon what condition must transactions in IRC securities be concluded?

    <p>Subject to the provisions of the Act and the IRC Rules</p> Signup and view all the answers

    What significant change occurred regarding the rules and directives after the integration of Yield-X and BESA?

    <p>They were renamed to JSE Interest Rate and Currency Rules and Directives</p> Signup and view all the answers

    Which of the following is a function of the JSE as stated in the rules and directives?

    <p>To provide facilities necessary for market operations</p> Signup and view all the answers

    What must trading members do when there is a decision made under the JSE IRC rules?

    <p>Be informed by the controlling body</p> Signup and view all the answers

    Study Notes

    Client and Trading Member Agreements

    • Client agreements must specify arrangements where a trading member controls the client's bond holdings, adhering to minimum requirements set out in regulation.
    • Only authorized individuals are allowed to withdraw or transfer bonds from a client custody account with the trading member's CSDP.
    • Trading members cannot control or hold custody over non-resident clients' bond holdings unless they are authorized banks.

    IRC Securities Pledge and Cession

    • A pledge or cession of uncategorized bonds must be recorded in the trading member's accounting system, detailing:
      • Name of the pledgee or cessionary (trading member or third party)
      • Quantity of bonds pledged or ceded
      • Date of the entry
    • A written agreement between involved parties is mandatory for pledging or cession.

    Relaxation or Indulgence in Margin Payments

    • Any concession on margin payments by a trading member is treated as a loan repayable on demand, accruing interest as per the client agreement or the Prescribed Rate of Interest Act if unspecified.
    • If the loan period exceeds two business days, immediate written notification to the client is required.

    Cash Deposit Regulations

    • Trading members cannot accept cash deposits exceeding R5,000 from any person, defined as coin or paper money.
    • Avoiding this rule by splitting cash into multiple transactions exceeding the threshold is prohibited.

    Non-Resident and Emigrant Client Regulations

    Bank Account Requirements

    • Non-resident clients must establish a non-resident account at an authorized bank before trading in IRC securities.

    Margin Payment Structure

    • The initial margin for non-resident clients correlates with what a resident client would pay, adjusted by the trading member's margin category.
    • Trading members cannot retain additional margins from non-resident client positions.

    Settlement Processes

    • Payments for initial and variation margins must flow through the non-resident account and the trading member's client trust account.
      • Initial margins must match those required for resident clients, with adjustments as necessary.
      • Compliance with South African Reserve Bank’s Exchange Control Regulations is mandatory for any interest and fees involved.
    • Settlement confirmations via SWIFT must indicate the net amounts for non-resident accounts, ensuring no margins for non-resident clients are retained.
    • Interest received by trading members from JSE Clear must be paid to non-resident accounts by the second business day after the interest accrues.
    • Avoidance of offsetting amounts between non-resident clients’ accounts is mandated to maintain financial compliance.

    Telephone Call Recording

    • All parties acknowledge and consent that telephone calls may be recorded.
    • Trading members must not tamper with telephone call recordings.
    • Tape-recordings must be retained for a minimum of 14 days by trading members.

    Separation of Client Assets

    • Trading members must separate clients’ assets, including funds and IRC securities, from their own assets.
    • Co-mingling client funds with personal assets of trading members is prohibited.
    • Client assets cannot be used to finance trading members' own transactions or business operations.
    • Retention of client funds or securities is limited to additional or retained margins.

    Management of Funds by JSE Clear

    • JSE Clear must separate the margins, monies, and securities of clearing and trading members from its own assets.
    • Clearing members can deposit additional margins with JSE Clear.
    • Monthly interest on margins held will be retained by JSE Clear as published in a notice.

    Trading Members’ Bank Accounts

    • Trading members must maintain separate bank accounts for client funds, including additional and retained margins.
    • Accurate records of client funds and margins must always be maintained for transparency and compliance.

    Bond Holdings Management

    • Trading members with custody over clients' bond holdings must segregate client positions from their proprietary positions.
    • Weekly reconciliation of client holdings with CSDP custody balances is mandatory, with discrepancies resolved within one day.

    IRC Securities as Collateral

    • Uncertificated bonds held by trading members must be recorded accurately for pledges or cessions in compliance with regulations.
    • Written agreements must exist for any pledge or cession, and trading members must maintain records of these agreements.

    Relaxation of Margin Payment Terms

    • Any relaxation of margin payments by trading members to clients is considered a loan, repayable on demand.
    • Interest for the loan is specified in the client agreement or defaults to the trading member's customary rate.

    Cash Deposits Regulations

    • Trading members cannot accept cash deposits exceeding R5,000 from any person.
    • Multiple cash transactions to evade this rule are also prohibited.

    Non-Resident and Emigrant Clients

    • Non-resident clients must open a non-resident account at an authorized bank for IRC securities trading before commencing trading.
    • Initial margin for non-resident clients is based on adjustments according to margin categories assigned by trading members.

    Payments and Interest for Non-Resident Clients

    • Payments for margins must be handled within non-resident accounts and conform to applicable Exchange Control Regulations.
    • Trading members must pay interest received from JSE Clear related to non-resident clients' positions into the clients' non-resident accounts promptly.
    • Amounts owed to non-resident clients cannot be offset against amounts owed from other non-resident clients.

    General Provisions

    • JSE Clear can limit aggregate exposure from proprietary and client positions of clearing and trading members.
    • Trading members must maintain records of proprietary transactions and client-related transactions.
    • Monthly confirmations to clients include transaction details, futures/options positions, bond positions, margin balances, and all payments made.

    Telephone Recordings

    • JSE and trading members may record telephone calls for compliance and evidence in disputes.
    • All parties must acknowledge the recording in agreements and cannot tamper with recordings.
    • Recorded calls must be kept for at least 14 days.

    Separation of Funds and IRC Securities

    • Trading members must always separate clients’ assets from their own to prevent co-mingling.
    • Funds or IRC securities cannot be used to finance the trading member's transactions or operations.
    • Trading members must manage and secure client funds and IRC securities properly.

    Management of Funds by JSE Clear

    • JSE Clear separates margins and other funds of its members from its own assets.
    • Monthly interest considerations are retained based on margins held for registered positions.

    Trading Members' Bank Accounts

    • Trading members must maintain separate bank accounts for client funds and margins.
    • Accurate records of additional margins and retained client funds must be consistently maintained.

    CSDP Accounts for Bonds

    • Trading members controlling client bond holdings must use separate accounts for client custody positions.
    • Accurate identification of bond ownership is required for transparency.

    Control of Client Holdings in Bonds

    • Trading members must record client bond holdings regularly and reconcile custodial records weekly.
    • Discrepancies must be rectified promptly, and arrangements must be documented in client agreements.

    IRC Securities Held as Collateral

    • Pledges or cessions of uncertificated bonds must be recorded explicitly with details of the pledgee and quantity pledged.
    • Written agreements are necessary for any pledges or rights transferred.

    Relaxation or Indulgence in Margin Payments

    • Any relaxation on margin payments is considered a loan, repayable on demand with applicable interest as per the agreement.
    • Members must inform clients in writing for loans extending beyond two business days.

    Acceptance of Cash Deposits

    • Trading members cannot accept cash deposits exceeding R5,000.
    • Proper offsets between amounts due to or from trading members must ensure no non-resident client margins are involved.

    Non-Resident Client Obligations

    • Trading members must pay any interest received back to the non-resident client's account after confirming positions in their name.
    • All actions related to non-resident clients must comply with local regulations regarding account handling and interest payments.

    Purpose and Enforcement of Rules

    • The JSE IRC Rules aim to regulate fair and efficient markets while ensuring orderly business operations aligned with the Act's objectives.
    • These rules are binding on trading members, their officers, employees, clients, and any entity conducting transactions with trading members.

    Transaction Conditions

    • All IRC securities transactions by trading members are subject to the Act's provisions, as well as the JSE's Rules and Directives.

    Clearing House Appointment

    • The JSE can appoint a clearing house or central counterparty (CCP) for clearing and settling trades in IRC securities according to established rules.

    Integration of Markets

    • Yield-X and BESA markets were integrated, combining their rules and directives.
    • The integrated framework is known as the JSE IRC Rules and Directives, building on the Yield-X rules with necessary amendments.

    Compensation Funds

    • The JSE can establish Compensation Funds to settle claims against defaulting trading members, limited to IRC securities transactions.
    • The funds are financed by levies on trading members, which can be passed on to clients involved in transactions.
    • Trustees manage the Compensation Funds' assets, liabilities, and income, including member levies.

    Settlement System Operations

    • The JSE may operate settlement systems or partner with third-party providers, enforcing compliance with procedures and fees for trading members.

    Studying That Suits You

    Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

    Quiz Team

    Description

    This quiz covers the essential aspects of client and trading member agreements, including control over bond holdings and the stipulations for pledging bonds. It also addresses the conditions under which margin payment relaxations can be offered. Test your understanding of these critical financial regulations.

    More Like This

    Trading Practices in Banking
    12 questions

    Trading Practices in Banking

    SweetheartCatharsis avatar
    SweetheartCatharsis
    Client Disclosure Guidelines
    83 questions

    Client Disclosure Guidelines

    LustrousReasoning4623 avatar
    LustrousReasoning4623
    Institutional Client Overview
    20 questions

    Institutional Client Overview

    TopQualityErbium avatar
    TopQualityErbium
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser