Conduct of Business.docx

Conduct of Business =================== Conduct of business ------------------- ### General Provisions #### Trading and position limits JSE Clear may, in terms of the JSE Clear rules, limit the aggregate exposure arising from the proprietary positions of a clearing member, the positions of the c...

Conduct of Business =================== Conduct of business ------------------- ### General Provisions #### Trading and position limits JSE Clear may, in terms of the JSE Clear rules, limit the aggregate exposure arising from the proprietary positions of a clearing member, the positions of the clients of the clearing member, the positions of trading members with which the clearing member has entered into clearing agreements and the positions of the clients of such trading members in a manner determined by JSE Clear. The clearing member may, in terms of the JSE Clear rules, limit the aggregate exposure arising from the proprietary positions of a trading member and the positions of the clients of such trading member. A clearing member may stipulate a limit to the number of futures and option contracts or a nominal value of bonds that may constitute a transaction by a particular trading member at any one time. #### Trading and Position Records A trading member shall at all times maintain records of -- - its proprietary transactions and transactions for or on behalf of other trading members and clients; - margin and other payments to and from JSE Clear, other trading members and their clients. A trading member shall confirm to a client at least once a month -- - the transactions done with or on behalf of the client during the period; - the futures and option contract positions of the client at the time of reporting; - the bonds positions of the client at the time of reporting, where a trading member has custody and control over such instruments; - the balances of additional and retained margin held for the client at the time of reporting; and - all payments to and from the client made or accrued during the period, including payments of margin, fees, and interest. The records shall be kept for a period of at least five years. #### Telephone Recordings - The JSE and trading members may tape-record all telephone calls. - A trading member must tape-record all telephonic orders received from or made to clients. - With respect to such telephone calls, the tape-recording shall be admissible as evidence in any disciplinary or dispute resolution proceedings contemplated in these rules: Provided that the person who intends to rely on such tape recordings in evidence shall bear the onus of proving the authenticity thereof. - All parties to the prescribed agreements shall in such agreement acknowledge and confirm that they are aware that telephone calls may be recorded, and they shall be deemed to have irrevocably consented thereto. - No trading member shall tamper with any tape-recording of any telephone call. - Tape-recordings shall be retained by the trading member for a period of at least 14 days. ### Management of trading members' and clients' accounts #### Separation of funds and IRC securities A trading member -- - shall at all times separate a client\'s or other trading member\'s assets, including funds, the IRC securities and other corporeal and incorporeal things of the client or other trading member, from its own assets; - may not co-mingle the funds or IRC securities of any client or another trading member with its own; - may not allow the use of funds or IRC securities or corporeal or incorporeal things belonging to any client or other trading member to finance its own transactions or the transactions of any other person; - may not allow the use of funds or IRC securities or corporeal or incorporeal things of any client or other trading member to operate its own business; and - in respect of the transactions or positions of a trading member or client, may not retain any funds, IRC securities or other corporeal or incorporeal things given by such trading member or client or received by the trading member on behalf of any person other than additional margin or retained margin, or IRC securities. #### Management of funds by JSE Clear JSE Clear shall separate the margins and other monies, IRC securities and other corporeal and incorporeal things of any clearing member, trading member or client from its own assets and will manage and invest such margins and other monies in a manner and subject to such terms and conditions as the controlling body of JSE Clear may decide. - A clearing member may deposit any additional margin kept by the JSE Clear. - A trading member may deposit any additional margin kept by it in respect of its resident clients with JSE Clear. JSE Clear will monthly in arrears, retain an interest consideration as determined and published in a notice by JSE Clear on any margins held by it in respect of any position registered in the name of any person during the month. #### Trading members\' bank accounts - The provisions of this rule apply in respect of additional margin and retained margin not deposited by a trading member with JSE Clear, and in respect of any other client funds held by a trading member. - A trading member shall, at all times, keep a separate bank account into which it must deposit, or in which it must hold, any additional margin kept by, any retained margin held on behalf of a client, or any other client funds held by the trading member. - A trading member shall, at all times, ensure that the correct amount of additional margin as required by the client agreement with the client is held in respect of each client with which it has entered into a client agreement. - A trading member's records shall, at all times, reflect the amount of additional margin, retained margin or other client funds held in respect of each client. #### Trading members\' accounts at CSDPs for bonds A trading member which has control over and custody of the bonds holdings of one or more of its clients shall operate separate accounts at its CSDP for the purpose of segregating the custody positions of its clients from its proprietary positions. #### Trading members' control of client holdings in bonds - Where a trading member has control over the bond's holdings of its clients, the details of such client bonds holdings shall be recorded in its accounting records in a manner that will render it possible at any time to establish readily the identity of the persons entitled to the ownership of such bonds. - A trading member that controls bonds holdings on behalf of its clients must balance and reconcile, on at least a weekly basis, its own client holdings records with the custody balances as reflected by its CSDP. Any reconciling differences identified between the respective records must be rectified within one day, unless there are circumstances beyond the control of the trading member that prevent a difference from being resolved within one day, in which case the difference must be rectified as soon as is reasonably possible. - At the request of the JSE, the trading member shall provide the JSE with a copy of the reconciliations performed in terms of rule the above, together with full details and explanations of reconciling items. - Any arrangements entered into between a client and a trading member whereby the trading member exercises control over the client's bonds holdings, shall be provided for in the client agreement that shall contain the minimum requirements as set out in Directive DD. - A trading member shall ensure that only suitably authorised persons are able to withdraw or transfer a trading member settled client's bonds from a client custody account held with the CSDP of the trading member. - A trading member shall be precluded from controlling or having custody over the holdings of its non- resident clients in bonds unless it is an authorised bank. #### #### IRC securities held as collateral In accordance with section 39 of the Financial Markets Act, a pledge or cession in securitatem debiti of uncertificated bonds held by a trading member on behalf of a client must be effected by means of an entry by the trading member in the pledgor or cedent's account in the trading member's accounting records specifying -- - the name of the pledgee or cessionary (either the trading member or a third party); - the quantity of uncertificated bonds pledged or ceded; and - the date of the entry. A pledge or cession referred to in rule 10.95.1 should not be effected without a written agreement between the parties to the pledge or cession and the trading member should keep a record of such agreements. #### Relaxation or indulgence given by a trading member A trading member who gives any relaxation or indulgence to a client regarding the payment of margin, whether initial margin, settlement margin, variation margin, top-up margin or additional margin, shall be deemed to have granted the client a loan repayable on demand in the amount of the shortfall for the period of the relaxation or indulgence at a rate of interest specified in the client agreement between them. If no rate is specified, the trading member's customary rate shall apply or if there is no customary rate, the rate determined in terms of the Prescribed Rate of Interest Act No. 55 of 1975 shall apply. The trading member shall, if such loan is for a period exceeding two business days, immediately inform the client thereof in writing. #### Acceptance of cash deposits No trading member shall knowingly receive or accept a deposit of cash from any person exceeding an amount of R5 000. For the purpose of this rule \"cash\" shall mean coin and paper money of the Republic or any other country. A trading member shall not receive or accept two or more cash amounts exceeding R5 000 in total with the purpose of avoiding compliance with this rule. ### Non-Resident and Emigrant Clients #### Bank accounts Before a trading member trades with a non-resident client, the non-resident client shall open a non-resident account at an authorised bank to be used for the purposes of trading in IRC securities. #### #### Margins payable The initial margin payable with respect to the open futures and option contract positions of a non-resident client shall be the initial margin that would otherwise have been payable by or to a trading member or a resident client in relation to equivalent positions, adjusted by the margin category assigned by the trading member in question to the non-resident client, and a trading member may not hold any retained or additional margins in relation to the positions of any non-resident client. #### Settlements With respect to his open futures and option contract positions, a non-resident client shall pay from his non-resident account to, or receive into his non-resident account from the client trust account of the trading member with whom he traded to open such positions, the net amount of the initial margin and variation margin provided that -- - the initial margin to be paid shall be the initial margin that would otherwise be required to be paid to JSE Clear in respect of equivalent positions of a trading member or a resident client adjusted by the margin category assigned by the trading member to the non-resident client in question; - a trading member must comply with any applicable Exchange Control Regulations as determined by the South African Reserve Bank regarding the payment of any interest and fees respectively in respect of a non- resident client; and - a trading member may not hold any retained or additional margin with respect to the positions of a non-resident client.97 The confirmation contained in the SWIFT non-resident account notification to the authorised bank shall confirm the net settlement amounts to be paid or received and shall require the authorised bank to release or accept this amount to or from the trading member concerned. The clearing member or JSE Clear, as the case may be, may off-set amount due to it against amounts due by it to or from a trading member: Provided that it can be ascertained from the statements passing between them that no margins or other monies of a non-resident client are being held by either JSE Clear or the clearing member. A trading member may not off-set the amounts due to a non-resident client against any amount due from any other non-resident client. A trading member shall not retain any interest paid to it by JSE Clear or its clearing member with respect to the open futures and option contract positions or unsettled bonds positions of a non-resident client, and on the second business day following the end of each month during which a non-resident client had a position registered in his name, the trading member shall pay to the authorised bank concerned for the credit of that non-resident client\'s non-resident account an amount equal to the amount received by it from its clearing member or JSE Clear, as the case may be, in respect of interest on margins provided that a clearing member who has a clearing agreement with the trading member concerned shall pay to the trading member an amount equal to that which it received in respect of the non-resident client\'s position from JSE Clear. A trading member may not off-set amounts due to be paid from a non-resident client's non-resident account against amounts to be paid into that non-resident client's non-resident account. The amount of interest shall be paid by the trading member to the authorised bank concerned by midday on the next business day after the business day on which the SWIFT non- resident account notification was received by the authorised bank concerned. #### Trading, clearing and settlement fees The trading member shall be entitled to claim payment for trading, clearing and settlement fees in respect of transactions with a non-resident client from the authorised bank concerned out of that non- resident client\'s non-resident account: Provided that-- - a trading member shall not be entitled to offset such fees against margin due by it to a non-resident client or against any balance due to the non-resident client; and - the authorised bank concerned shall compare the transactions referred to in the non-resident account clearance certificate against the transactions referred to in the trading member\'s statement claiming such fees in respect of such transactions and may inform the JSE of any discrepancy.