FMPRR Interest Rate & Currency Clearing 2024

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Questions and Answers

Which of the following best describes the function of the Compensation Funds established by the JSE?

To compensate any member for losses arising from market volatility.

To provide grants to new trading members for capital requirements.

To reimburse members for losses due to system outages.

To cover claims against trading members for liabilities incurred prior to their default. (correct)

What requirement must an applicant satisfy in order to become a trading member of the JSE?

Comply with the guidelines set by the JSE, including additional requirements that may be determined by them. (correct)

Have prior experience in international trading.

Be a resident of the country where the JSE operates.

Submit a detailed financial report to the JSE.

How does the JSE manage the income of the Compensation Funds?

The trading members collectively decide on its utilization each quarter.

The income is returned to the trading members based on their transaction volume.

It is managed by an independent third party on behalf of the members.

The trustees administer it as part of the Compensation Funds. (correct)

Which aspect of trading does the JSE explicitly include in its settlement system procedures?

Requirements traders must meet when utilizing the settlement systems. Signup and view all the answers

What can a trading member do in relation to the levy imposed by the JSE for transactions?

Recover the levy from the buyer or seller they represent in a transaction. Signup and view all the answers

Under what conditions can claims be made against the Compensation Funds?

Claims are limited to liabilities arising from transactions in IRC securities. Signup and view all the answers

What is a key responsibility of the trustees of the Compensation Funds?

They acquire, incur, and administer the assets and liabilities of the Compensation Funds. Signup and view all the answers

Which criteria must an officer meet to be considered for management of a trading member?

Must have a clean criminal record. Signup and view all the answers

What can lead to disqualification from being an officer of a trading member?

Being declared a defaulting trading member. Signup and view all the answers

What does the JSE require from officers regarding past legal issues?

They must not have been held liable for any market abuse. Signup and view all the answers

Which circumstance does NOT affect an officer's eligibility according to the requirements?

Holding multiple directorships in unrelated companies. Signup and view all the answers

What is required for a waiver by the JSE concerning officer criteria?

It can be revoked with one month's notice. Signup and view all the answers

What is the primary purpose of the JSE Interest Rate and Currency Derivatives Rules and Directives?

To maintain fair and efficient markets within the JSE operations Signup and view all the answers

Which entities are bound by the JSE IRC Rules and Directives?

Trading members, their clients, and any parties engaged in transactions Signup and view all the answers

What role does a clearing house serve in the context of JSE IRC transactions?

To clear and settle trades in IRC securities as per JSE Rules Signup and view all the answers

After the integration of Yield-X and BESA, what document serves as the foundation for the new rules?

Yield-X rules and directives Signup and view all the answers

Which of the following is NOT a requirement specified in the JSE IRC Rules?

Members must submit annual financial audits to the JSE Signup and view all the answers

What does the term 'capital adequacy' refer to in the context of trading members?

The amount of liquid assets trading members must maintain Signup and view all the answers

How does the JSE ensure that the business is conducted with orderly professionalism?

By establishing binding rules and directives for all members Signup and view all the answers

What must every transaction in IRC securities be conducted under?

Specific conditions laid out by the JSE Act and Directives Signup and view all the answers

What is the expected outcome of the integration of the Yield-X and BESA rules?

Creation of a unified trading framework for members Signup and view all the answers

Which of the following best defines market conduct standards in the JSE context?

Ethical behaviors and practices expected from trading members Signup and view all the answers

Which of the following is NOT considered a reason for disqualification of an officer in a trading member context?

Voluntary resignation from a financial position Signup and view all the answers

What criterion must be met for an officer of a trading member to fulfill legal capacity requirements?

Must be of full legal capacity Signup and view all the answers

Which action could result in an individual being declared ineligible as a trading member officer due to market conduct violations?

Being accused of fraud during a regulatory investigation Signup and view all the answers

Which statement best reflects the JSE's stance on waivers for officers regarding their compliance to criteria?

Waivers can be issued for a limited time and can be revoked with a notice period Signup and view all the answers

In the context of financial compliance regulations, which statement is true regarding past activity that could affect an officer's eligibility?

Previously held civil liabilities might influence eligibility depending on severity Signup and view all the answers

What is the primary obligation of trading members in relation to client funds?

To guarantee that management of client funds adheres to specific rules Signup and view all the answers

Which of the following is NOT a requirement for trading members regarding their internal procedures?

Having a dedicated legal advisor on staff Signup and view all the answers

What specific roles must be registered with the JSE by trading members?

Compliance officer, settlement officer, and alternate settlement officer Signup and view all the answers

What is required of trading members intending to transact in bonds on the JSE trading system?

Appointment of a central securities depository participant (CSDP) Signup and view all the answers

Which requirement is essential for trading members to effectively manage funds?

Complying with financial resources requirements specific to their category Signup and view all the answers

How should a trading member respond if they fail to maintain the procedures required for regulated services?

Implement corrective measures to address the shortcomings Signup and view all the answers

What must a trading member do when transacting for clients?

Accurately report clients' transactions and cash balances timely Signup and view all the answers

What is the maximum time allowed for a trading member to submit their monthly capital adequacy return?

Ten business days Signup and view all the answers

Which type of trading member is exempt from submitting the monthly capital adequacy return under the specified rules?

A trading member that trades solely for its own account in derivatives Signup and view all the answers

What is a consideration for the Director: Market Regulation when assessing a trading member's exemption application?

The relative trading activity compared to their main exchange Signup and view all the answers

If a trading member is granted an exemption regarding the capital adequacy return, what may they still be required to submit?

A copy of the capital adequacy return from the other exchange Signup and view all the answers

What action must a trading member take upon realizing they have not met the capital adequacy requirements?

Notify the Director: Market Regulation in writing Signup and view all the answers

Which of the following is NOT a criterion for exemption from submitting capital adequacy returns?

Trading derivatives for third-party accounts Signup and view all the answers

If a trading member does not submit the capital adequacy return on time, what potential consequence do they face?

Suspension from trading Signup and view all the answers

What must a trading member do to remain compliant if they are exempt from submitting capital adequacy returns?

Notify the JSE if capital requirements are not met Signup and view all the answers

Under what circumstances can a trading member apply for exemption based on their activities with another exchange?

If capital requirements are similar to those of the JSE Signup and view all the answers

What is a mandatory action for trading members in relation to market abuse violations?

Maintain detailed transaction records Signup and view all the answers

What specific responsibilities must trading members undertake to manage their clients' funds effectively?

Maintain accurate and timely records of transactions and cash balances. Signup and view all the answers

Which of the following is NOT a requirement for a trading member regarding compliance with financial regulations?

Having a dedicated team of revenue officers. Signup and view all the answers

What role does the compliance officer serve for a trading member in relation to market conduct violations?

To oversee that all trading activities adhere to established legal and ethical standards. Signup and view all the answers

Which of the following statements accurately reflects the requirement for trading members regarding the registration of officers?

All officers must be registered with the JSE regardless of their roles. Signup and view all the answers

In the context of client transactions, what is an obligation of trading members?

Report all relevant transaction information and cash balances to clients in a timely manner. Signup and view all the answers

What must trading members do if they intend to enter into transactions that will be cleared by JSE Clear?

Appoint a clearing member or be authorized as one. Signup and view all the answers

Which circumstance could lead to disqualification for a trading member's officer according to financial compliance regulations?

Filing inaccurate reports about client transactions. Signup and view all the answers

What is the maximum number of business days a trading member has to submit their monthly capital adequacy return?

Ten business days Signup and view all the answers

Which type of trading member is allowed an exemption from submitting the monthly capital adequacy return?

State-owned entities Signup and view all the answers

Which of the following factors must be considered by the Director: Market Regulation when assessing a trading member's exemption application?

The relative activity undertaken on both JSE and another exchange Signup and view all the answers

If a trading member fails to meet the relevant capital adequacy requirements, what action must they take?

They must notify the Director: Market Regulation in writing Signup and view all the answers

What must a trading member that is exempt from submitting capital adequacy returns still do?

Advise the Director if they fail to meet capital adequacy requirements Signup and view all the answers

Which requirement must a trading member fulfill to apply for exemption based on their activities with another exchange?

Being an authorised user of the other exchange Signup and view all the answers

What consequence can a trading member face for not submitting the capital adequacy return on time?

A potential suspension from trading Signup and view all the answers

In the context of legal capacity requirements, what is one of the criteria that an officer must meet?

Complying with the requirements imposed by the JSE Signup and view all the answers

How should the trading member position itself in case of market abuse violations?

Conduct an internal investigation immediately Signup and view all the answers

Which financial compliance regulation requires timely submission from trading members?

Monthly capital adequacy returns Signup and view all the answers

Which of the following criteria would disqualify an officer from managing a trading member?

Being convicted of a criminal offense involving market abuse Signup and view all the answers

What is a requirement regarding legal capacity for officers of trading members?

Must not be an unrehabilitated insolvent Signup and view all the answers

Which action is considered a market abuse violation that could impact an officer's eligibility?

Engaging in insider trading Signup and view all the answers

What best describes a potential consequence for officers who fail to comply with financial regulations?

They risk being expelled from the trading member status Signup and view all the answers

In managing client funds, what is a specific obligation of trading members?

To maintain separate accounts for client funds and firm funds Signup and view all the answers

Study Notes

Compensation Funds

JSE has authority to establish and manage Compensation Funds to cover claims related to trading member defaults.
Payments from these funds are restricted to specific claim amounts defined in the funds' rules.
Claims must arise from transactions in IRC securities and are subject to defenses by the defaulting trading member.
JSE determines a levy on transactions for funding the Compensation Funds, which trading members can recover from clients involved in transactions.
Trustees manage the assets and income of these Compensation Funds, including contributions from trading members.

Settlement System

JSE can operate its own settlement systems or contract third parties for the operation of such systems.
Procedures, requirements, and fees for trading members using settlement systems will be set by the JSE.

General Membership Requirements

Applicants for trading membership must meet designated criteria and additional requirements determined by the JSE.
JSE maintains a register of trading members, detailing their categories and authorizations.

Purpose of IRC Rules and Directives

The rules and directives aim to promote fair, efficient markets, ensuring orderly business practices in alignment with the JSE’s goals.
All trading members, their clients, and associated securities depositories must adhere to these binding rules and directives.
Transactions in IRC securities are conditional on compliance with the Act and JSE regulations.

Appointment of Clearing House

JSE is authorized to appoint a clearing house or a central counterparty for trade clearing and settlement in IRC securities.
The clearing house must comply with established rules and facilitate other necessary functions.

Transitional Provisions

Integration of the Yield-X and BESA markets has occurred, merging their rules and directives.
The combined framework is now referred to as the JSE IRC rules and directives.

Risk Management and Officer Requirements

Trading members must be overseen by reputable individuals with high business integrity.
Officers must meet several criteria, including:
- Full legal capacity and absence of insolvency.
- No history of criminal offenses related to fraud, theft, or market abuse.
- Compliance with regulations concerning market integrity, money laundering, and financial service provision.
JSE may issue waivers for certain criteria, which are revocable upon notification.

Trading Member Obligations

Trading members must maintain procedures, systems, resources, and expertise for effective regulated service performance.
Compliance with the Act, relevant rules, and Financial Intelligence Centre Act is mandatory.
Adequate management of funds belonging to themselves and clients is required; adherence to fund management rules is essential.
Accurate records of client positions must be maintained at all times.
Clients' transactions and cash balances must be reported timely when transacting on their behalf.
Compliance with financial resource requirements relevant to their category of authorized user is necessary.
A trading member must appoint a clearing member if entering transactions cleared by JSE Clear.
Appointing a Central Securities Depository Participant (CSDP) is required for bond transactions on the JSE trading system.

Registration of Officers

Each trading member must ensure the JSE registers a compliance officer, a settlement officer, and an alternate settlement officer.

Capital Adequacy Returns

Monthly capital adequacy returns must be submitted to the Director: Market Regulation within ten business days post-month-end.
Failure to timely submit these returns can lead to trading suspension.
Certain entities (banks, foreign bank branches, state-owned entities, and specific derivative traders) are exempt from this requirement under specific conditions.
Authorized users of other exchanges can apply for exemptions provided their capital requirements align with those of the JSE and they submit returns to their primary exchange.
The Director: Market Regulation will evaluate the trading member's activity level on both exchanges when considering exemption requests.
Exempt members must inform the Director if capital adequacy standards are not met.

General Requirements for Officers

Officers must be of good reputation and high business standing, as recognized by the JSE.
Officers need to have full legal capacity and adhere to good character criteria as determined by the JSE.
Certain disqualifications include being an unrehabilitated insolvent or having prior convictions related to fraud, theft, or market abuse.
Any claims of civil or administrative liability in relevant areas can lead to disqualification.
Expulsion from any exchange or being the subject of investigations can disqualify individuals from serving as officers.
Waivers for certain criteria may be granted by the JSE but can be revoked with one month’s notice.

Trading Member Obligations

Trading members must maintain procedures, systems, resources, and expertise for effective regulated service performance.
Compliance with the Act, relevant rules, and Financial Intelligence Centre Act is mandatory.
Adequate management of funds belonging to themselves and clients is required; adherence to fund management rules is essential.
Accurate records of client positions must be maintained at all times.
Clients' transactions and cash balances must be reported timely when transacting on their behalf.
Compliance with financial resource requirements relevant to their category of authorized user is necessary.
A trading member must appoint a clearing member if entering transactions cleared by JSE Clear.
Appointing a Central Securities Depository Participant (CSDP) is required for bond transactions on the JSE trading system.

Registration of Officers

Each trading member must ensure the JSE registers a compliance officer, a settlement officer, and an alternate settlement officer.

Capital Adequacy Returns

Monthly capital adequacy returns must be submitted to the Director: Market Regulation within ten business days post-month-end.
Failure to timely submit these returns can lead to trading suspension.
Certain entities (banks, foreign bank branches, state-owned entities, and specific derivative traders) are exempt from this requirement under specific conditions.
Authorized users of other exchanges can apply for exemptions provided their capital requirements align with those of the JSE and they submit returns to their primary exchange.
The Director: Market Regulation will evaluate the trading member's activity level on both exchanges when considering exemption requests.
Exempt members must inform the Director if capital adequacy standards are not met.

General Requirements for Officers

Officers must be of good reputation and high business standing, as recognized by the JSE.
Officers need to have full legal capacity and adhere to good character criteria as determined by the JSE.
Certain disqualifications include being an unrehabilitated insolvent or having prior convictions related to fraud, theft, or market abuse.
Any claims of civil or administrative liability in relevant areas can lead to disqualification.
Expulsion from any exchange or being the subject of investigations can disqualify individuals from serving as officers.
Waivers for certain criteria may be granted by the JSE but can be revoked with one month’s notice.

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Description

Explore the guidelines set forth in the FMPRR for Interest Rate and Currency Clearing. This quiz will cover the transitional provisions related to the integration of Yield-X and BESA rules. Test your knowledge on the role of the JSE in establishing Compensation Funds.