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JSE Clear Settlement Procedures
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JSE Clear Settlement Procedures

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Questions and Answers

What principle governs the settlement of Bond ETP securities?

  • Settlement occurs at the discretion of the Settlement Authority.
  • Trade by trade between parties. (correct)
  • Only after final verification of trades.
  • Settle in bulk transactions among groups.

    • Which of the following accurately describes a function of the JSE Clearing and Settlement division?

  • Performing risk assessments for corporate bonds.
  • Monitoring of ETP trade settlements. (correct)
  • Setting interest rates for bond transactions.
  • Issuance of new financial instruments.

    • Who performs the role of the Settlement Authority for Cash Bond Securities listed on the JSE?

  • The ETP Market Minister.
  • The Central Bank of South Africa.
  • The Bonds Clearing and Settlement team. (correct)
  • External auditors assigned by the JSE.

    • What does the Settlement Authority manage regarding Bond ETP securities?

    <p>The settlement risks associated with transactions.</p> Signup and view all the answers

    What role does the Settlement Authority play in relation to SARB and Primary Dealers?

    <p>Lender of last resort.</p> Signup and view all the answers

    What is guaranteed by a trading member under the IRC Rules regarding Settlement Assurance?

    <p>The fulfilment of all transactions in IRC securities</p> Signup and view all the answers

    Under what circumstance do the IRC Rules regarding Settlement Assurance not apply?

    <p>When only one trading member is involved in a transaction</p> Signup and view all the answers

    If a client is not aware of their settlement obligations, what is the outcome according to the IRC Settlement principles?

    <p>The client is still bound by the settlement rules</p> Signup and view all the answers

    Which of the following is NOT a principle for the settlement of bonds?

    <p>Using a centralized clearing house</p> Signup and view all the answers

    What is the main role of the Settlement Authority in bond transactions?

    <p>To manage the settlement of transactions executed on the central order book</p> Signup and view all the answers

    Which statement accurately describes a client's recourse in an off-book transaction?

    <p>Clients have no recourse against a trading member in that transaction</p> Signup and view all the answers

    How does the IRC define the relationship between trade participants for bond settlements?

    <p>Clients must rely solely on their trading members</p> Signup and view all the answers

    In bond transactions, what does the term 'rolling' refer to?

    <p>Renewing a financial instrument with a new arrangement</p> Signup and view all the answers

    What must a clearing member pay to JSE Clear in terms of non-resident clients?

    <p>The initial margin and variation margin</p> Signup and view all the answers

    What is the deadline for a clearing member to pay amounts due under JSE Clear rule 5.7.1?

    <p>Not later than 10h00 on the business day following the payment accrual</p> Signup and view all the answers

    In terms of JSE Clear rules, when must a clearing member pay the variation margin upon receiving a mark-to-market notification?

    <p>At the time stipulated by JSE Clear upon notification</p> Signup and view all the answers

    How does a clearing member act in relation to the positions of trading member clients?

    <p>As a settlement agent on behalf of those parties</p> Signup and view all the answers

    Which of the following is NOT included in the net amount a trading member pays to the clearing member?

    <p>Commission fees for each transaction</p> Signup and view all the answers

    What types of fees are associated with transactions in interest rate and currency derivatives?

    <p>Trading, clearing, and settlement fees</p> Signup and view all the answers

    Which action is specifically mentioned regarding the clearing member's responsibility towards JSE Clear?

    <p>Paying both initial margin and variation margin in a timely manner</p> Signup and view all the answers

    What does the variation margin relate to when discussing proprietary positions?

    <p>The adjustments in the value of marked positions</p> Signup and view all the answers

    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?

    <p>Notify the Settlement Authority immediately.</p> Signup and view all the answers

    What is the latest time by which a member's CSDP must recommit to settle a Bond ETP securities transaction?

    <p>15h00 on the settlement date.</p> Signup and view all the answers

    If a member's CSDP must retract their commitment to settle a sale transaction, what could be a potential reason?

    <p>The member is unable to settle another transaction dependent on the first.</p> Signup and view all the answers

    What action is required by a member if their CSDP has not committed to a sale transaction by 13h15 on the settlement date?

    <p>The member must ensure steps are taken to recommit by 15h00.</p> Signup and view all the answers

    What consequence might follow if a member fails to act by 14h00 regarding an uncommitted sale transaction?

    <p>The member will need to cover the transaction by borrowing securities.</p> Signup and view all the answers

    At what time on the settlement date does a member's commitment to settle a transaction become unconditional?

    <p>8h30.</p> Signup and view all the answers

    What must a member comply with if the Settlement Authority determines to roll a transaction to a later date?

    <p>Act according to the instructions from the Settlement Authority.</p> Signup and view all the answers

    Which time frame is critical for a member to cover an uncommitted sale transaction to avoid penalties?

    <p>By 14h00 on the settlement date.</p> Signup and view all the answers

    What is the latest time by which allocations for trades due to settle on the same day must be made on the trade date?

    <p>12h00</p> Signup and view all the answers

    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?

    <p>17h00</p> Signup and view all the answers

    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?

    <p>Effect the principal assignment by 12h00 on the trade date</p> Signup and view all the answers

    What is the consequence of late allocations that contravene the provided rules?

    <p>The Settlement Authority will process them with a fee</p> Signup and view all the answers

    When must allocations for trades due to settle on the second business day after the trade date be made?

    <p>By 12h00 on the first business day after the trade date</p> Signup and view all the answers

    What must happen if a late allocation occurs?

    <p>It must be communicated to the client</p> Signup and view all the answers

    Which is not a valid timeframe for trades due to settle on the first business day after the trade date?

    <p>14h30 on trade date</p> Signup and view all the answers

    What is the fee-related procedure for late principal assignment trades?

    <p>A fee as prescribed must be paid</p> Signup and view all the answers

    Study Notes

    JSE Clear Settlement Procedures

    • 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.

    • This includes initial margin for non-resident clients, variation margin, and trading, clearing, and settlement fees for interest rate and currency derivatives.

    • 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.

    • For mark-to-market positions, clearing members pay JSE Clear the variation margin at the time stipulated by JSE Clear.

    • 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

    • Trading members pay or receive net amounts from clearing members for proprietary positions and client positions.

    • 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

    • The Bonds Clearing and Settlement team acts as the Settlement Authority for cash bond securities listed on the JSE.

    • 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

    • 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

    • A CSDP's commitment to settle a transaction in Bond ETP securities becomes unconditional as at 8:30 on the settlement date.

    • 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.

    • The Settlement Authority will determine whether to roll the settlement to a later date. Members must follow the instructions received from the Settlement Authority.

    • A member's CSDP may retract their commitment to settle a sale transaction pending further action or resolution of a dependency.

    • 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.

    • 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

    • 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.

    • 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.

    • 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.

    • 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

    • 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

    • A trade in bonds by a trading member is allocated to a client or the trading member's proprietary account on the trade date.

    • Late allocations are effected by the Settlement Authority subject to a fee.

    • Late principal assignment trades are effected by the Settlement Authority subject to a fee.

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    Clearing and Settlement Function.docx

    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.

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