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Questions and Answers
Which of the following statements about inter-dealer brokers (IDB) is correct?
Which of the following statements about inter-dealer brokers (IDB) is correct?
What is a requirement for an IRC trading member authorized as an IDB?
What is a requirement for an IRC trading member authorized as an IDB?
In the context of an IDB, which of the following activities is explicitly prohibited?
In the context of an IDB, which of the following activities is explicitly prohibited?
What condition may the JSE impose on an IRC trading member authorized as an IDB?
What condition may the JSE impose on an IRC trading member authorized as an IDB?
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Which of the following best describes the nature of transactions arranged by an IDB?
Which of the following best describes the nature of transactions arranged by an IDB?
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What is the primary purpose of the JSE Interest Rate and Currency Derivatives Rules and Directives?
What is the primary purpose of the JSE Interest Rate and Currency Derivatives Rules and Directives?
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Who is bound by the JSE Interest Rate and Currency Derivatives Rules and Directives?
Who is bound by the JSE Interest Rate and Currency Derivatives Rules and Directives?
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What condition must be met for transactions in IRC securities to be valid?
What condition must be met for transactions in IRC securities to be valid?
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What is the role of the clearing house appointed by the JSE?
What is the role of the clearing house appointed by the JSE?
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Which markets were integrated to form the basis of the JSE IRC Rules and Directives?
Which markets were integrated to form the basis of the JSE IRC Rules and Directives?
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What terminology is used to describe the updated rules after the integration of Yield-X and BESA?
What terminology is used to describe the updated rules after the integration of Yield-X and BESA?
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What was a necessary provision to carry out the integration of the Yield-X and BESA markets?
What was a necessary provision to carry out the integration of the Yield-X and BESA markets?
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Why is the framework established by the JSE essential for the business conduct?
Why is the framework established by the JSE essential for the business conduct?
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What is the purpose of the Compensation Funds as established by the JSE?
What is the purpose of the Compensation Funds as established by the JSE?
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Which of the following statements is true regarding the income of the Compensation Funds?
Which of the following statements is true regarding the income of the Compensation Funds?
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What authority does the JSE have concerning settlement systems?
What authority does the JSE have concerning settlement systems?
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How does the JSE manage claims arising from defaulting trading members?
How does the JSE manage claims arising from defaulting trading members?
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What is a prerequisite for being classified as a trading member at the JSE?
What is a prerequisite for being classified as a trading member at the JSE?
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In what scenario can a trading member recover the levy imposed by the Compensation Funds?
In what scenario can a trading member recover the levy imposed by the Compensation Funds?
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What restriction applies to trading members regarding clearing agreements?
What restriction applies to trading members regarding clearing agreements?
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What role do trustees play in relation to the Compensation Funds?
What role do trustees play in relation to the Compensation Funds?
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What is the minimum notice period required for a trading member to inform the JSE of a change in business infrastructure?
What is the minimum notice period required for a trading member to inform the JSE of a change in business infrastructure?
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Which of the following must accompany the notification of a business change to the JSE?
Which of the following must accompany the notification of a business change to the JSE?
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What may the JSE request when a trading member notifies them of a change in business?
What may the JSE request when a trading member notifies them of a change in business?
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Under which circumstance may the JSE require a new application for membership?
Under which circumstance may the JSE require a new application for membership?
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What does the termination of or change in membership notify to trading members?
What does the termination of or change in membership notify to trading members?
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Which of the following options describes a situation that would NOT require notification to the JSE?
Which of the following options describes a situation that would NOT require notification to the JSE?
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What could be a potential consequence of failing to notify the JSE of a change in business one month prior?
What could be a potential consequence of failing to notify the JSE of a change in business one month prior?
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In the context of informing the JSE, what might the term 'change' include?
In the context of informing the JSE, what might the term 'change' include?
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What is the minimum initial capital required for a trading member who does not receive or hold a client's margins?
What is the minimum initial capital required for a trading member who does not receive or hold a client's margins?
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Which scenario may lead to the suspension of a trading member by the JSE?
Which scenario may lead to the suspension of a trading member by the JSE?
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How long must a trading member give notice to terminate its membership?
How long must a trading member give notice to terminate its membership?
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What must be fulfilled before the termination of membership is accepted by the Membership Committee?
What must be fulfilled before the termination of membership is accepted by the Membership Committee?
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What is the initial capital requirement for a trading member who holds client margins?
What is the initial capital requirement for a trading member who holds client margins?
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What must a trading member do in case of changes in name or corporate structure?
What must a trading member do in case of changes in name or corporate structure?
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What consequence can arise from the JSE's decision regarding membership termination?
What consequence can arise from the JSE's decision regarding membership termination?
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What must happen for a trading member to change sub-categories of authorized users?
What must happen for a trading member to change sub-categories of authorized users?
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What limitation is placed on claims paid from the Compensation Funds?
What limitation is placed on claims paid from the Compensation Funds?
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What is required for a trading member to recover the levy imposed by the Compensation Funds?
What is required for a trading member to recover the levy imposed by the Compensation Funds?
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What authority do trustees have concerning the assets of the Compensation Funds?
What authority do trustees have concerning the assets of the Compensation Funds?
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What is the nature of the fees that trading members must pay for using settlement systems?
What is the nature of the fees that trading members must pay for using settlement systems?
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What category of member can trade for and on behalf of clients?
What category of member can trade for and on behalf of clients?
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Which statement is true regarding the general membership requirements for trading members?
Which statement is true regarding the general membership requirements for trading members?
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How are the claims against defaulting trading members handled?
How are the claims against defaulting trading members handled?
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What is true about a trading member's clearing agreement?
What is true about a trading member's clearing agreement?
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What is the primary purpose of the JSE Interest Rate and Currency Derivatives Rules and Directives?
What is the primary purpose of the JSE Interest Rate and Currency Derivatives Rules and Directives?
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Which entities are considered bound by the JSE Interest Rate and Currency Derivatives Rules and Directives?
Which entities are considered bound by the JSE Interest Rate and Currency Derivatives Rules and Directives?
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What condition must be met for a transaction in IRC securities to be valid?
What condition must be met for a transaction in IRC securities to be valid?
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What function does the JSE appoint a clearing house or CCP to perform?
What function does the JSE appoint a clearing house or CCP to perform?
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What was the significant change involving Yield-X and BESA in relation to the JSE?
What was the significant change involving Yield-X and BESA in relation to the JSE?
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Which statement correctly describes the transitional provisions regarding the JSE markets?
Which statement correctly describes the transitional provisions regarding the JSE markets?
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How does the JSE ensure that trading is conducted efficiently and orderly?
How does the JSE ensure that trading is conducted efficiently and orderly?
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What is implied by the requirement that every IRC securities transaction must be concluded subject to the JSE Rules?
What is implied by the requirement that every IRC securities transaction must be concluded subject to the JSE Rules?
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What is included in the capital adequacy requirements that a trading member must satisfy?
What is included in the capital adequacy requirements that a trading member must satisfy?
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Which statement correctly describes the capital adequacy requirements for trading members that are external companies?
Which statement correctly describes the capital adequacy requirements for trading members that are external companies?
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In which scenario is a trading member exempt from submitting monthly capital adequacy returns?
In which scenario is a trading member exempt from submitting monthly capital adequacy returns?
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What must the capital adequacy requirements for a trading member that is a branch of a foreign bank adhere to?
What must the capital adequacy requirements for a trading member that is a branch of a foreign bank adhere to?
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Which of the following is NOT a requirement stated for a trading member that trades derivatives?
Which of the following is NOT a requirement stated for a trading member that trades derivatives?
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What is the requirement regarding the operating costs for external companies as trading members?
What is the requirement regarding the operating costs for external companies as trading members?
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What is required from the foreign parent company of a local branch regarding capital adequacy?
What is required from the foreign parent company of a local branch regarding capital adequacy?
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Which of the following risks is NOT part of the capital adequacy requirements for trading members?
Which of the following risks is NOT part of the capital adequacy requirements for trading members?
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What is the minimum initial capital a trading member must hold if they receive client margins?
What is the minimum initial capital a trading member must hold if they receive client margins?
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What action may the JSE take if a trading member has capital adequacy deficiencies?
What action may the JSE take if a trading member has capital adequacy deficiencies?
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What must a trading member do to terminate its membership?
What must a trading member do to terminate its membership?
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What should a trading member do upon a change in their corporate structure?
What should a trading member do upon a change in their corporate structure?
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What happens if a trading member's request for termination is not accepted by the Membership Committee?
What happens if a trading member's request for termination is not accepted by the Membership Committee?
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Who has the authority to determine the minimum capital requirements for trading members?
Who has the authority to determine the minimum capital requirements for trading members?
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Which of the following is NOT a condition for a trading member's termination of membership?
Which of the following is NOT a condition for a trading member's termination of membership?
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Which initial capital amount is required for a trading member who does not handle any client's assets?
Which initial capital amount is required for a trading member who does not handle any client's assets?
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What is the minimum time frame for a trading member to inform the JSE of a business transfer?
What is the minimum time frame for a trading member to inform the JSE of a business transfer?
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Which requirement must accompany a notification of changes in business to the JSE?
Which requirement must accompany a notification of changes in business to the JSE?
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What discretion does the JSE have regarding a trading member's change in business?
What discretion does the JSE have regarding a trading member's change in business?
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What is the effect of the JSE's notification to a trading member regarding membership termination?
What is the effect of the JSE's notification to a trading member regarding membership termination?
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In what scenario may the JSE require a trading member to submit a new application for membership?
In what scenario may the JSE require a trading member to submit a new application for membership?
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What types of business changes must a trading member inform the JSE about?
What types of business changes must a trading member inform the JSE about?
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What could happen if a trading member fails to notify the JSE of a business change within the stipulated time frame?
What could happen if a trading member fails to notify the JSE of a business change within the stipulated time frame?
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What type of information must be provided to the JSE alongside the notification of a business change?
What type of information must be provided to the JSE alongside the notification of a business change?
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Study Notes
Purpose of the JSE Interest Rate and Currency Derivatives (IRC) Rules and Directives
- To establish and regulate fair and efficient markets
- To ensure the business of the JSE is carried out in an orderly manner, with due regard to the objects of the Act
Who are the Rules and Directives Binding Upon
- Trading members
- Officers of trading members
- Employees of trading members
- Clients of a trading members
- Any other person who concludes a transaction with a trading member in the course of that trading member's business
- CSDP's acting on behalf of trading members and their clients
Transaction in IRC Securities
- Every transaction in IRC securities requires the transaction to be entered into subject to the provisions of:
- The Act
- The JSE Interest Rate and Currency Derivatives (IRC) Rules and Directives
- The Directives
Clearing Houses
- The JSE may appoint a clearing house or a clearing house and central counterparty (CCP)
- Purpose: to clear and / or settle trades in IRC securities on the JSE in accordance with the Rules
Transitional Provisions
-
JSE markets Yield-X and BESA were integrated
-
Yield-X's rules and directives form the basis of the rules and directives for the integrated markets, with amendments having been made to give effect to the integration.
-
The integrated markets were re-named as the JSE Interest Rate and Currency ("IRC") Rules and Directives
Compensation Funds
- The JSE has the power to establish and maintain one or more Compensation Funds:
- To pay claims in respect of liabilities arising prior to the default of a trading member
- The payment is limited to claims arising out of transactions in IRC securities with or on behalf of other persons by such trading member and such other liabilities as may be specified in the rules of the Compensation Funds
- The payment is subject to any defences which the defaulting trading member may have against a claimant
- The JSE has the power to determine a levy to be payable by every trading member to the Compensation Funds on transactions in IRC securities.
Settlement Systems
- The JSE may operate, or contract with a third party to operate, one or more settlement systems.
- The JSE may prescribe:
- Procedures and requirements with which trading members must comply when using such settlement systems
- The fees payable by trading members for the use of such settlement systems
General Membership Requirements
- In order to qualify to be a trading member, an applicant must comply with the requirements set out in this rule and such other requirements as the JSE may determine.
- The JSE keeps a register of all trading members indicating in which category or sub-category of authorised user the trading member has been authorised to operate.
Categories of Membership
- A trading member may only enter into a clearing agreement with one clearing member to perform the clearing and settlement of the transactions of that trading member.
- A trading member may be a clearing member and may trade for and on behalf of clients.
- An "inter-dealer broker" (IDB) is a sub-category of trading member:
- That is subject to the rules pertaining to IDBs
- That may not be a clearing member.
Specific Requirements Applicable to Inter-Dealer Brokers (IDB)
- Business activities in the JSE listed bonds must be limited to:
- Arranging transactions between two counterparties on a name give-up basis
- Trading with or on behalf of two other parties on a matched principal basis
- When transacting in bonds with or on behalf of other trading members or clients on a matched principal basis, it may not take a proprietary position against the other trading member or the client
- It must, on request from any trading member with or on whose behalf it is going to trade in bonds as a matched principal, provide the list of clients who may be the opposite counterparties to such transactions.
Trading Member Capital Requirements
- A trading member who trades on behalf of clients but does not receive a client's margins or hold the client's margins or who does not receive any other assets of a client with respect to the client's buying and selling of JSE authorised investments, shall have an initial capital of at least R200 000 or such other minimum amount that the JSE may decide.
- A trading member who receives a client's margins or holds the clients' margins, or that receives any other assets of a client with respect to the client's buying and selling of JSE authorised investments, shall have an initial capital of at least R400 000, or such other minimum amount that the JSE may decide.
- The JSE may suspend a trading member if there is a deficiency in the capital adequacy of the trading member.
Voluntary Changes to, or Termination of, Membership
- A trading member wishing to change its authorised user status or wishes to obtain authorisation to operate in another sub-category of authorised user, shall apply mutatis mutandis.
- A trading member undergoing any of the changes in name or corporate structure:
- Shall forthwith inform the JSE in writing of the change
- The notification shall be accompanied by the relevant certificate of name change
- If a trading member's business or infrastructure relating to trading in IRC securities is transferred to another legal entity, the notification shall be accompanied by such information as would be required in the case of a new application for membership.
- A trading member may apply to terminate its membership by giving 30 days written notice to the JSE.
- The Membership Committee may accept the termination unconditionally or subject to such conditions as it may deem fit or may refuse to accept the termination until it is satisfied that all outstanding contractual or other obligations of the trading member have been met.
- The JSE shall notify trading members of the termination of or change in membership, and the termination shall become effective on the date and time of the notice, unless stated otherwise in the notice.
Purpose of the JSE IRC Rules
- The JSE IRC rules establish and regulate fair and efficient markets for interest rate and currency derivatives.
- The rules are designed to ensure all business of the JSE is conducted in an orderly manner.
Binding Parties
- All trading members are required to follow the rules.
- This extends to trading members' employees, clients, and any other individual who has concluded a deal with a trading member.
- Central Securities Depositories (CSDP's) who act for trading members and their clients are subject to the rules.
Application of the Rules
- All dealings in IRC securities by trading members are subject to the provisions of the Act, JSE IRC Rules, and issued directives.
Clearing House Appointment
- The JSE may appoint a clearing house or a clearing house and central counterparty (CCP).
- These bodies are responsible for clearing and settling trades in IRC securities on the JSE.
Integration of Yield-X and BESA
- The Yield-X and BESA markets were integrated, merging the rules and directives of the two exchanges.
- The integrated rules and directives are now referred to as the JSE Interest Rate and Currency (IRC) Rules and Directives.
Compensation Funds
- The JSE has the authority to establish and maintain compensation funds.
- These funds cover claims arising from trading member defaults up to a specified limit.
- Trading members are subject to a levy on transactions in IRC securities, with the income of the funds administered by trustees.
Settlement System
- The JSE may operate, or contract with a third party to operate, one or more settlement systems.
- The JSE sets procedures for trading members using these systems, including fees payable.
General Membership Requirements
- Applicants for trading membership must meet specific requirements established by the JSE.
- A register records all trading members and their authorized user status.
Categories of Membership
- A trading member can only have a clearing agreement with a single clearing member for the clearing and settlement of their trading activities.
- Trading members can be clearing members themselves and act on behalf of clients.
Capital Adequacy Requirements
- Trading members must maintain a specific level of own funds, calculated based on various components (initial capital, operating costs, risk requirements).
- A formula is used to ensure these requirements are met.
- Different requirements apply to trading members that are external companies, branches of foreign banks, authorized users of other exchanges, and those trading solely for their own account.
- The JSE may suspend a trading member if there is a deficiency in their capital adequacy.
Voluntary Changes and Termination of Membership
- Trading members may apply to change their authorized user status or terminate their membership.
- The JSE will notify trading members of membership termination or changes. The termination becomes effective on the date and time specified in the notice.
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Description
This quiz covers the purpose, binding parties, and transaction regulations related to the JSE Interest Rate and Currency Derivatives (IRC) Rules and Directives. Understand how these rules ensure fair markets and orderly transactions. Perfect for those studying financial regulations and market operations.