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?

    <p>Requirements traders must meet when utilizing the settlement systems.</p> Signup and view all the answers

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

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

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

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

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

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

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

    <p>Must have a clean criminal record.</p> Signup and view all the answers

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

    <p>Being declared a defaulting trading member.</p> Signup and view all the answers

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

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

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

    <p>Holding multiple directorships in unrelated companies.</p> Signup and view all the answers

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

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

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

    <p>To maintain fair and efficient markets within the JSE operations</p> Signup and view all the answers

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

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

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

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

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

    <p>Yield-X rules and directives</p> Signup and view all the answers

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

    <p>Members must submit annual financial audits to the JSE</p> Signup and view all the answers

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

    <p>The amount of liquid assets trading members must maintain</p> Signup and view all the answers

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

    <p>By establishing binding rules and directives for all members</p> Signup and view all the answers

    What must every transaction in IRC securities be conducted under?

    <p>Specific conditions laid out by the JSE Act and Directives</p> Signup and view all the answers

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

    <p>Creation of a unified trading framework for members</p> Signup and view all the answers

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

    <p>Ethical behaviors and practices expected from trading members</p> 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?

    <p>Voluntary resignation from a financial position</p> Signup and view all the answers

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

    <p>Must be of full legal capacity</p> 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?

    <p>Being accused of fraud during a regulatory investigation</p> Signup and view all the answers

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

    <p>Waivers can be issued for a limited time and can be revoked with a notice period</p> 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?

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

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

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

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

    <p>Having a dedicated legal advisor on staff</p> Signup and view all the answers

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

    <p>Compliance officer, settlement officer, and alternate settlement officer</p> Signup and view all the answers

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

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

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

    <p>Complying with financial resources requirements specific to their category</p> Signup and view all the answers

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

    <p>Implement corrective measures to address the shortcomings</p> Signup and view all the answers

    What must a trading member do when transacting for clients?

    <p>Accurately report clients' transactions and cash balances timely</p> Signup and view all the answers

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

    <p>Ten business days</p> Signup and view all the answers

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

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

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

    <p>The relative trading activity compared to their main exchange</p> 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?

    <p>A copy of the capital adequacy return from the other exchange</p> Signup and view all the answers

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

    <p>Notify the Director: Market Regulation in writing</p> Signup and view all the answers

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

    <p>Trading derivatives for third-party accounts</p> 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?

    <p>Suspension from trading</p> Signup and view all the answers

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

    <p>Notify the JSE if capital requirements are not met</p> Signup and view all the answers

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

    <p>If capital requirements are similar to those of the JSE</p> Signup and view all the answers

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

    <p>Maintain detailed transaction records</p> Signup and view all the answers

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

    <p>Maintain accurate and timely records of transactions and cash balances.</p> Signup and view all the answers

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

    <p>Having a dedicated team of revenue officers.</p> Signup and view all the answers

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

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

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

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

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

    <p>Report all relevant transaction information and cash balances to clients in a timely manner.</p> 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?

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

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

    <p>Filing inaccurate reports about client transactions.</p> 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?

    <p>Ten business days</p> Signup and view all the answers

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

    <p>State-owned entities</p> 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?

    <p>The relative activity undertaken on both JSE and another exchange</p> Signup and view all the answers

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

    <p>They must notify the Director: Market Regulation in writing</p> Signup and view all the answers

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

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

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

    <p>Being an authorised user of the other exchange</p> Signup and view all the answers

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

    <p>A potential suspension from trading</p> Signup and view all the answers

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

    <p>Complying with the requirements imposed by the JSE</p> Signup and view all the answers

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

    <p>Conduct an internal investigation immediately</p> Signup and view all the answers

    Which financial compliance regulation requires timely submission from trading members?

    <p>Monthly capital adequacy returns</p> Signup and view all the answers

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

    <p>Being convicted of a criminal offense involving market abuse</p> Signup and view all the answers

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

    <p>Must not be an unrehabilitated insolvent</p> Signup and view all the answers

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

    <p>Engaging in insider trading</p> Signup and view all the answers

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

    <p>They risk being expelled from the trading member status</p> Signup and view all the answers

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

    <p>To maintain separate accounts for client funds and firm funds</p> 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.

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