Questions and Answers
What must be included in the client agreement regarding bonds held by a trading member?
What is required for a trading member to control a non-resident client's bond holdings?
What information must be specified in the trading member's accounting records when effecting a cession of uncertificated bonds?
What is the consequence of a trading member granting relaxation or indulgence in margin payments?
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What is the required action when a loan for margin shortfall exceeds two business days?
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What must a trading member do if they accept a cash deposit exceeding R5,000?
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What happens if no interest rate is specified in the client agreement for a relaxation granted?
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Which of the following is NOT a required detail for pledging bonds?
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What does the process of clearing involve in terms of JSE Clear's role?
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What does the term 'closeout' specifically refer to in trading activities?
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Who is considered the governing body managing the affairs of JSE?
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What are corporate actions in relation to bonds generally referred to?
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Which of the following best describes currency derivatives?
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In the clearing process, what guarantees all obligations arising from a trade?
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What occurs during a closeout in terms of market positions?
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Which entity manages the affairs of JSE Clear?
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What is the key feature of corporate actions for bondholders?
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Which term refers to the financial contracts linked to exchange rates?
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What role does a clearing member serve in the clearing process?
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What action signifies the expiration of an IRC security position?
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In the context of clearing services, which of the following is least likely to occur?
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What is meant by 'additional margin' in the context of trading agreements?
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Which of the following best describes 'aggregate position' in trading?
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In what scenario would an 'aggressive order' be used?
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What is included in the definition of 'advice' for trading members?
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Which entity qualifies as an 'authorised bank'?
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What does the term 'allocation' refer to when discussed in a trading context?
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What is the primary function of an 'authorised dealer' in relation to gold transactions?
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Which of the following best captures the essence of 'controlling body governance' in trading?
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What role does 'AML/CFT/PF' play in financial markets?
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In which circumstance is a trading member likely to utilize a clearing service?
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What is the significance of 'closeout mechanisms' in trading environments?
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A trading member is allowed to co-mingle a client’s IRC securities with its own assets.
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JSE Clear is required to manage client margins independently from its own assets.
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Telephone calls related to trading agreements may not be recorded without prior consent.
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Tape-recordings of telephone calls must be retained by the trading member for a period of at least 30 days.
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A clearing member may freely use the funds of its clients for personal transactions.
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Monthly interest considerations on margins held by JSE Clear are determined by a notice published by JSE Clear.
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Trading members may retain client funds if they are specifically requiring additional margin.
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Clients may consent to the use of their securities for financing transactions by the trading member.
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A trading member is required to cooperate with regulatory bodies only if they are conducting an investigation related to foreign legislation.
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Advertising material must include a comparison with other trading members to highlight the advantages of services offered.
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A trading member can engage in transactions resulting from unsolicited calls without any compliance with relevant rules.
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All employees of a trading member are exempt from the provisions of the code as they are considered independent agents.
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It is mandatory for advertising to emphasize the potential for guaranteed profits from trading in derivative instruments.
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A commitment by a CSDP to settle a transaction in Bond ETP securities becomes unconditional at 8h30 on the settlement date.
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If a member's CSDP has not committed to settle by 18h00 on the business day prior to the settlement date, the member must take no further action.
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By 13h15 on the settlement date, if the member's CSDP has not committed to settle, the member has until 16h00 to ensure the CSDP is ready to recommit.
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If a dependency on another transaction exists, a member's CSDP may retract their commitment to settle the sale transaction.
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The member must cover the uncommitted sale transaction by taking necessary steps by 14h00 on the settlement date.
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The Settlement Authority can instruct a member to borrow securities from private investors when there are uncommitted transactions.
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If the circumstances arise, a member's CSDP must commit to settling a Bond ETP securities sale transaction no later than 16h00.
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Members are allowed to delay taking action for uncommitted transactions until after 14h00 on the settlement date.
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The Settlement Authority can defer the settlement of Bond ETP securities only upon receiving explicit instructions from the CSD.
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Members must ensure their CSDP commits to settling Bond ETP securities transactions by 17h30 on the business day preceding the settlement date.
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A trading member can receive cash amounts totaling R5,000 or less without any restrictions.
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If a member's CSDP is committed to settle a transaction, the member can always revoke this commitment without any limitations.
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Non-resident clients do not need to open a specific type of bank account to trade in IRC securities.
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The settlement of a transaction in Bond ETP securities is always conducted through physical paperwork.
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A member is required to inform the Settlement Authority immediately if a transaction in Bond ETP securities is unlikely to settle.
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The initial margin required from non-resident clients is the same as that for resident clients, without any adjustments.
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A trading member can hold additional margins related to the positions of a non-resident client.
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The Settlement Authority can only act in cases where the settlement of Bond ETP securities is guaranteed not to take place on the settlement date.
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The settlement of Bond ETP securities takes place on the second business day after the trade date.
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Confirmation from the SWIFT non-resident account notification verifies the net settlement amounts for trading members.
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Notification to the CSD is not required if a member defers the settlement of a Bond ETP securities transaction due to potential systemic risk.
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A trading member is exempt from complying with Exchange Control Regulations when dealing with non-resident clients.
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Variation margins are not required for non-resident clients in their open futures and option contract positions.
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The maximum cash amount that can be accepted to avoid compliance with regulations is R10,000.
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Study Notes
Definitions and Roles
- Authorised Dealer: Individuals authorized by the Treasury to engage in gold and foreign exchange transactions.
- Bonds: JSE-listed securities signifying an issuer's indebtedness.
- Bond ETP Securities: Bonds listed on the JSE, tradable via Bond ETP trading systems.
- Bond ETP Market: JSE-operated market for trading Bond ETP securities.
- Bond ETP Trading System: Computer systems used by JSE for Bond ETP securities trading.
- Buy: Involves purchasing futures, options, or bonds, with obligations based on future pricing.
- Call Option Contract: Provides the holder the right to buy underlying instruments at a specified strike price.
- Carry Transaction: Involves concurrent buying and selling of bonds at an agreed future date and price.
Trading and Market Operations
- Clearing: Process where JSE Clear becomes the central counterparty within derivative securities trades.
- Market Controller: JSE-appointed individual responsible for daily trading system operations.
- Market Maker: Trading member authorized to create liquidity in currency derivatives.
- Matched Principal: Transactions facilitated by a trading member without revealing counterparty identities.
- Off-Book Trade: IRC securities transactions negotiated outside the central order book but reported to JSE.
Margin Requirements
- Margin Types: Include initial margin, settlement margin, variation margin, top-up margin, and retained margin.
- Top-Up Margin: Additional funds required due to adverse market position fluctuations.
- Variation Margin: Amount payable based on market value changes of positions in futures and options.
Compliance and Regulation
- Clearing Member: Entities authorized to provide clearing services under JSE Clear rules.
- Registered Officer: Compliance or settlement officers registered by the JSE.
- Financial Markets Act: Regulation governing pledges or cessions of uncertificated bonds held by members.
- Relaxation of Margin Payments: Treats margin shortfalls as client loans, repayable on demand with specified interest rates.
Securities and Transactions
- IRC Securities: Bonds and derivatives traded on the JSE trading system.
- CSDP: Central securities depository participant settled bonds transactions on behalf of members.
- Underlying Instrument: The specific asset or index relevant to a futures or options contract.
- Cash Deposits: Trading members are prohibited from accepting cash deposits exceeding R5,000.
Corporate Actions and Rights
- Corporate Action: Economic benefits or rights deriving from bond ownership.
- Exercise Rights: Registered holders of long positions in option contracts can buy or sell underlying instruments at a designated strike price.
General Compliance
- SRO Oversight Committee: JSE Board sub-committee overseeing market and issuer regulation functions.
- Strate: Licensed entity serving as a central securities depository within regulatory frameworks.
Miscellaneous
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UNSCR: Refers to United Nations Security Council resolutions regarding financial regulations.
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Swift: Society for Worldwide Interbank Financial Telecommunication facilitating international exchange-related communications. ### Definitions Overview
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Act: Refers to the Financial Markets Act (Act No. 19 of 2012) and related measures set by the Minister of Finance or the Registrar.
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Additional Margin: Extra funds deposited beyond the initial margin, either by:
- A trading member to its clearing member as per a clearing agreement.
- A client to its trading member following a client agreement.
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Advice: Covers various communication forms aimed at promoting trading member services, including:
- Written, printed, electronic, or oral communications.
- Broadcasts via public radio or television, without detailed service information.
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Aggregate Position: Encompasses all proprietary positions for:
- A trading member’s securities.
- A client's registered securities.
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Aggressive Order: An order that instantly matches with an existing order in the central order book upon entry, facilitating immediate trades.
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Allocation: The process of transferring trades within the JSE trading system, from a trading member's account to a client, based on the original trade price or average price.
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Authorised Bank: A branch of an Authorised Dealer, designated to manage securities control according to Exchange Control Regulation 14.
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Authorised Dealer: An individual:
- Authorized to trade in gold by the Treasury.
- Authorized to transact in foreign exchange.
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AML/CFT/PF: Acronym for Anti-Money Laundering, Counter-Terrorist Financing, and Proliferation Financing, focusing on regulatory measures to combat financial crime.
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Authorised User: Defined similarly to section 1 of the Act, indicating a person sanctioned by a licensed exchange to conduct specific activities.
Telephone Call Recordings
- All participants in agreements must acknowledge potential recording of telephone calls and consent irrevocably.
- Tampering with telephone call recordings is strictly prohibited.
- Trading members must retain tape recordings for a minimum of 14 days.
Management of Trading Members' and Clients' Accounts
- Client assets, including funds and IRC securities, must be kept separate from trading members' own assets.
- Co-mingling of clients' funds or IRC securities with a trading member's assets is forbidden.
- Client assets cannot be used to finance the trading member's transactions or business operations.
- Trading members must not retain client funds except for additional or retained margins.
Management of Funds by JSE Clear
- JSE Clear separates margins and client assets from its own for management and investment purposes.
- Clearing members can deposit additional margins with JSE Clear.
- Interest on margins is calculated and published monthly by JSE Clear.
Settlement of Bond ETP Securities
- Transactions in Bond ETP securities are settled electronically via the Central Securities Depository (CSD).
- Commitments for transactions must be made by CSDPs by 18h00 the business day before settlement.
- Actual settlement occurs three business days after trade date.
Member Settlement Obligations
- Members are responsible for ensuring completion of Bond ETP securities transactions.
- Immediate notification to the Settlement Authority is required for any unlikely settlements.
- Members must arrange for CSDP commitments by 17h30 on the business day prior to settlement.
Cash Transactions
- Cash refers to physical currency from any nation.
- Trading members cannot receive multiple cash amounts exceeding R5,000 to avoid rule compliance.
Non-Resident and Emigrant Clients
- Non-resident clients must open accounts at authorized banks for trading in IRC securities.
- Initial margins for non-resident clients are adjusted based on the trading member's classification.
- All transactions are subject to South African Exchange Control Regulations.
Co-operation with Regulators
- Trading members are expected to maintain an open and cooperative relationship with the JSE and other regulatory bodies.
- Timely disclosure of relevant information to regulators is required.
Code Enforcement on Employees
- Trading members must implement the provisions of the code among all employees.
Unsolicited Calls
- Transactions following unsolicited calls are permissible if the IRC Rules are adhered to.
Advertising by Trading Members
- Advertising must be clear, accurate, and highlight risks associated with investments.
- Members cannot make comparative claims against other trading members or suggest trading in derivatives is suitable for everyone.
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Description
Test your knowledge of key terms related to gold and bond trading. This quiz covers important definitions and roles in trading operations, including derivatives, options, and the trading systems at the JSE. Perfect for students and finance professionals alike!
