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Questions and Answers
What principle governs the settlement of Bond ETP securities?
What principle governs the settlement of Bond ETP securities?
Which of the following accurately describes a function of the JSE Clearing and Settlement division?
Which of the following accurately describes a function of the JSE Clearing and Settlement division?
Who performs the role of the Settlement Authority for Cash Bond Securities listed on the JSE?
Who performs the role of the Settlement Authority for Cash Bond Securities listed on the JSE?
What does the Settlement Authority manage regarding Bond ETP securities?
What does the Settlement Authority manage regarding Bond ETP securities?
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What role does the Settlement Authority play in relation to SARB and Primary Dealers?
What role does the Settlement Authority play in relation to SARB and Primary Dealers?
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What is guaranteed by a trading member under the IRC Rules regarding Settlement Assurance?
What is guaranteed by a trading member under the IRC Rules regarding Settlement Assurance?
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Under what circumstance do the IRC Rules regarding Settlement Assurance not apply?
Under what circumstance do the IRC Rules regarding Settlement Assurance not apply?
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If a client is not aware of their settlement obligations, what is the outcome according to the IRC Settlement principles?
If a client is not aware of their settlement obligations, what is the outcome according to the IRC Settlement principles?
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Which of the following is NOT a principle for the settlement of bonds?
Which of the following is NOT a principle for the settlement of bonds?
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What is the main role of the Settlement Authority in bond transactions?
What is the main role of the Settlement Authority in bond transactions?
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Which statement accurately describes a client's recourse in an off-book transaction?
Which statement accurately describes a client's recourse in an off-book transaction?
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How does the IRC define the relationship between trade participants for bond settlements?
How does the IRC define the relationship between trade participants for bond settlements?
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In bond transactions, what does the term 'rolling' refer to?
In bond transactions, what does the term 'rolling' refer to?
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What must a clearing member pay to JSE Clear in terms of non-resident clients?
What must a clearing member pay to JSE Clear in terms of non-resident clients?
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What is the deadline for a clearing member to pay amounts due under JSE Clear rule 5.7.1?
What is the deadline for a clearing member to pay amounts due under JSE Clear rule 5.7.1?
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In terms of JSE Clear rules, when must a clearing member pay the variation margin upon receiving a mark-to-market notification?
In terms of JSE Clear rules, when must a clearing member pay the variation margin upon receiving a mark-to-market notification?
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How does a clearing member act in relation to the positions of trading member clients?
How does a clearing member act in relation to the positions of trading member clients?
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Which of the following is NOT included in the net amount a trading member pays to the clearing member?
Which of the following is NOT included in the net amount a trading member pays to the clearing member?
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What types of fees are associated with transactions in interest rate and currency derivatives?
What types of fees are associated with transactions in interest rate and currency derivatives?
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Which action is specifically mentioned regarding the clearing member's responsibility towards JSE Clear?
Which action is specifically mentioned regarding the clearing member's responsibility towards JSE Clear?
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What does the variation margin relate to when discussing proprietary positions?
What does the variation margin relate to when discussing proprietary positions?
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What must a member do if their CSDP is unable to commit to settling a transaction in Bond ETP securities by 18h00 on the business day before the settlement date?
What must a member do if their CSDP is unable to commit to settling a transaction in Bond ETP securities by 18h00 on the business day before the settlement date?
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What is the latest time by which a member's CSDP must recommit to settle a Bond ETP securities transaction?
What is the latest time by which a member's CSDP must recommit to settle a Bond ETP securities transaction?
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If a member's CSDP must retract their commitment to settle a sale transaction, what could be a potential reason?
If a member's CSDP must retract their commitment to settle a sale transaction, what could be a potential reason?
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What action is required by a member if their CSDP has not committed to a sale transaction by 13h15 on the settlement date?
What action is required by a member if their CSDP has not committed to a sale transaction by 13h15 on the settlement date?
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What consequence might follow if a member fails to act by 14h00 regarding an uncommitted sale transaction?
What consequence might follow if a member fails to act by 14h00 regarding an uncommitted sale transaction?
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At what time on the settlement date does a member's commitment to settle a transaction become unconditional?
At what time on the settlement date does a member's commitment to settle a transaction become unconditional?
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What must a member comply with if the Settlement Authority determines to roll a transaction to a later date?
What must a member comply with if the Settlement Authority determines to roll a transaction to a later date?
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Which time frame is critical for a member to cover an uncommitted sale transaction to avoid penalties?
Which time frame is critical for a member to cover an uncommitted sale transaction to avoid penalties?
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What is the latest time by which allocations for trades due to settle on the same day must be made on the trade date?
What is the latest time by which allocations for trades due to settle on the same day must be made on the trade date?
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For trades due to settle on the first business day after the trade date, by what time must allocations be completed on the trade date?
For trades due to settle on the first business day after the trade date, by what time must allocations be completed on the trade date?
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What action is required if a trade is not assigned on the trade date for same day trades due to settle on the trade date?
What action is required if a trade is not assigned on the trade date for same day trades due to settle on the trade date?
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What is the consequence of late allocations that contravene the provided rules?
What is the consequence of late allocations that contravene the provided rules?
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When must allocations for trades due to settle on the second business day after the trade date be made?
When must allocations for trades due to settle on the second business day after the trade date be made?
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What must happen if a late allocation occurs?
What must happen if a late allocation occurs?
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Which is not a valid timeframe for trades due to settle on the first business day after the trade date?
Which is not a valid timeframe for trades due to settle on the first business day after the trade date?
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What is the fee-related procedure for late principal assignment trades?
What is the fee-related procedure for late principal assignment trades?
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Study Notes
JSE Clear Settlement Procedures
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Clearing members pay or receive net amounts from JSE Clear for proprietary positions, client positions, and positions of trading members with whom they have clearing agreements.
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This includes initial margin for non-resident clients, variation margin, and trading, clearing, and settlement fees for interest rate and currency derivatives.
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Payments are due by 10:00 on the business day following the day on which the payment accrued, or at another time determined by JSE Clear.
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For mark-to-market positions, clearing members pay JSE Clear the variation margin at the time stipulated by JSE Clear.
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Clearing members act as settlement agents for their clients and other trading members in relation to amounts paid to or received from JSE Clear.
JSE Clear Settlement Procedures - Trading Members
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Trading members pay or receive net amounts from clearing members for proprietary positions and client positions.
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This includes initial margin for non-resident clients, additional margin, variation margin, and trading, clearing, and settlement fees for interest rate and currency derivatives.
Bond ETP Securities Settlement
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The Bonds Clearing and Settlement team acts as the Settlement Authority for cash bond securities listed on the JSE.
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The Settlement Authority ensures that trades in these securities are settled accordingly.
Functions of the JSE Clearing and Settlement Division - Cash Bonds Market and ETP
- The JSE Clearing and Settlement division performs several functions, including:
- Settlement assurance for trades executed in the ETP market
- Monitoring bond settlements
- Acting as lender of last resort between the SARB and Primary Dealer
- Acting as lender of last resort for IRC members
- Balancing daily margin and maintenance levels of primary dealers
- Assisting market regulation with the cancellation of ETP trades
- Monitoring ETP trade settlements
- Monitoring cash bond settlements
- Advising members of uncommitted positions and potential issues
- Managing the same-day window and extensions in the cash bonds market
- Issuing fines for rule violations in the Cash Bonds Market
- Inward listing for bonds reporting
Section 8 of the Bond ETP Rules and Directives
- The settlement of Bond ETP securities is based on the following principles:
- Trade by trade
- Between buyer and seller
- On a rolling and contractual basis, with transactions becoming contractually due to be settled a prescribed number of days after the trade date
Settlement Authority - Bond ETP Securities
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The Settlement Authority manages:
- Settlement of transactions in Bond ETP securities executed on the Bond ETP trading system and the ETP fails management trading system
- Risks associated with the settlement of Bond ETP securities
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A CSDP's commitment to settle a transaction in Bond ETP securities becomes unconditional as at 8:30 on the settlement date.
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If a member cannot ensure their CSDP commits to settling a transaction by 18:00 on the business day preceding the settlement date, they must notify the Settlement Authority immediately.
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The Settlement Authority will determine whether to roll the settlement to a later date. Members must follow the instructions received from the Settlement Authority.
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A member's CSDP may retract their commitment to settle a sale transaction pending further action or resolution of a dependency.
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If the member's CSDP has not committed to settling a sale transaction by 13:15 on the settlement date, the member must take steps to ensure their CSDP recommits to settling the transaction.
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If the member's CSDP has not committed to settling a sale transaction by 15:00, the Settlement Authority will instruct the member to cover the uncommitted sale transaction by borrowing the relevant securities from National Treasury through the South African Reserve Bank.
IRC Settlement - Settlement Assurance
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A trading member guarantees the fulfillment of all transactions in IRC securities executed on the central order book of the JSE trading system or reported to the JSE trading system.
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IRC Settlement Assurance rules do not apply to off-book transactions where:
- Only one trading member is involved, and clients who are parties to the transaction have concluded the terms of the transaction and instructed the trading member to report it to the JSE trading system.
- A trading member facilitates a transaction in bonds on a name give-up basis on behalf of a client or another trading member, and the trading member is not recorded as a counterparty to the transaction reported to the JSE trading system.
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A client's action in respect of a market transaction is against the trading member who entered into the transaction on the client's instruction, not against other trading members or clients of such trading members.
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Trading members must ensure that buyers and sellers of bonds are aware of their settlement obligations. Clients remain bound by settlement rules even if they are not aware of them.
Settlement Principles for Bonds
- The settlement of bonds is based on the following principles:
- Trade by trade
- Between the scrip root and the cash root
- Rolling and contractual
Settlement Authority - Bonds
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The Settlement Authority manages:
- Settlement of transactions in bonds executed on the central order book of the JSE trading system
- Settlement of all off-book transactions in bonds reported to the JSE trading system
- Risks associated with the settlement of transactions
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A trade in bonds by a trading member is allocated to a client or the trading member's proprietary account on the trade date.
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Late allocations are effected by the Settlement Authority subject to a fee.
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Late principal assignment trades are effected by the Settlement Authority subject to a fee.
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Description
This quiz covers the settlement procedures at JSE Clear, focusing on the roles of clearing members and trading members. It includes details about margin payments, fees, and payment timelines related to positions in interest rate and currency derivatives. Test your understanding of these important settlement protocols.
