Presentation is loading. Please wait.

Presentation is loading. Please wait.

Copyright© JSE Limited 2008 www.jse.co.za Brett Kotze Clearing & Settlement Division 08 February 2010 The move to T+3 1.

Similar presentations


Presentation on theme: "Copyright© JSE Limited 2008 www.jse.co.za Brett Kotze Clearing & Settlement Division 08 February 2010 The move to T+3 1."— Presentation transcript:

1 Copyright© JSE Limited Brett Kotze Clearing & Settlement Division 08 February 2010 The move to T+3 1

2 Agenda Introduction Settlement timelines – on-exchange and off-exchange Separation of Proprietary Deals and Controlled Clients Settlement Assurance for T+3 Corporate Actions Securities Lending & Borrowing Conversion from T+5 to T+3 2

3 Moving to T+3 Project  Phase 1 Producing a document detailing the potential barriers and the high-level activities to overcome such barriers (to accompany the JSE’s 2008 license renewal application);  Phase 2 Nomination of responsible parties to further the investigations within their working groups, coordinated by the JSE, with their combined outputs being the creation of a “Blueprint for T+3” document; and  Phase 3 Impact analysis and agreeing an implementation plan for T+3 with all market participants 3

4 Phase 1: Output  The JSE submitted the document detailing the barriers and the high-level activities to overcome such barriers to the FSB with the JSE’s 2008 license renewal;  The FSB accepted the document and requested a quarterly update on the status of the action items;  The JSE initiated Phase 2 with the parties that would address the 58 action items. 4

5 Phase 2: Further Investigations  Phase 2 was about getting the nominated parties to further investigate the action items and identified issues and define solutions (the “blueprints”);  The workgroups reported into the JSE Clearing & Settlement Division;  Representatives from the Clearing & Settlement Division (and other JSE Divisions where applicable) sat on each committee or workgroup;  Forms of Business Requirement Specifications were created and signed off by the market; and  Blueprint completed by the JSE. 5

6 Phase 2: Completion of blueprint The output for Phase 2 was the creation of a blueprint for the move to T+3 which was tabled and approved by JSE Exco in May

7 Phase 3: Impact Analysis and Implementation Plan  Phase 3 is about the impact analysis and implementation plan for moving to T+3;  The implementation plan will detail how the transition from T+5 to T+3 is going to be managed;  Where possible, changes will be made immediately, as opposed to waiting for moving to T+3 (has already started); and  JSE SRP dependency - how the systems may be developed for T+3 and implemented in 2011 after SRP. 7

8 JSE Impact Analysis and Implementation Plan CSAC – sub-committee reconstituted Met on 29 May 2009 All market constituents on sub-committee JSE on committee – also Project Managed by JSE 8

9 Phase 4 Project Management System Changes Management of timelines Changes to Listing requirements Changes to JSE and Strate Rules and Directives Marketing and Education Making sure everyone is ready to go-live Go-live 9

10 T+1T+2T+5T+4T+3 T Current T+5 Settlement Cycle Principal AssumptionBroker Net Non-Controlled Client Breach Settlement Order Deal Execution Deal Allocation Contract Note Client Affirmation to CSDP or Client Rejection to Broker Broker Re-Allocation Client Affirmation on Re-Allocation CSDP Commitment Broker Borrowing SA Margining CSDP Commit SA Borrowing Settlement Failed Trade Deemed Affirmation Client / Broker

11 Possible T+3 Settlement Cycle Reducing the timeframe in which to conduct the existing processes and activities will result in quicker settlement.

12 On-market activities current versus future ActionCurrent Timings – T+5Future Timings – T+3 Settlement Orders – non-controlled clients T - BatchT - Realtime after allocations Client Affirmation to CSDP/Rejection to broker T+2 (12h00)T+1 (18h00) Deemed Affirmation ClientT+2 (12h00)T+1 (18h00) Broker re-allocationT+2 (16h00)T+1 (18h00) Client affirmation of re-allocationT+2 (16h00)T+1 (18h00) Brokers netsT+2 (EOD)T+1 (EOD)

13 On-market activities current versus future Cont… ActionCurrent Timings – T+5Future Timings – T+3 Non-controlled client breachT+3 (12h00)T+2 (12h00) Principal AssumptionT+4 (10h00)T+2 (16h00) MarginingT+3 (EOD)T+1 (EOD) Broker borrowing on Principal Assumption T+4 (10h00 to 12h00)T+2 (16h00 to 18h00) Settlement Authority SLBT+4 (12h00 to 16h00)T+3 (08h00 to 10h00) Failed Trade/Rolling Of SettlementT+4 (16h00 to 18h00)T+3 (10h00 to 12h00) SettlementT+5T+3

14 Off-markets activities current versus future TypeCurrent Settlement Cycle Reporting Time Commit / BTB Time Future Settlement Cycle Reporting Time Commit / BTB Time Depository Receipts Min T+115h00 (S-1)17h00 (S-1)Min T+111h00 (S-1)15h00 (S-1) Off-marketsT+512h30 (S-2)17h00 (S-2)T+311h00 (S-1)15h00 (S-1) Acct Transfers Inter- CSDP Min T+115h00 (S-1)17h00 (S-1)Min T+014h00 (S)15h00 (S) Acct Transfers Intra- CSDP Min T+018h00 (S) Min T+018h00 (S) Acct Transfers on RD N/A where elective CA Min T+009h00 (S)10h00 (S) Portfolio Moves Inter- CSDP Min T+115h00 (S-1)17h00 (S-1)Min T+014h00 (S)15h00 (S)

15 Off-markets activities current versus future Cont… TypeCurrent Settlement Cycle Reporting Time Commit / BTB Time Future Settlement Cycle Reporting Time Commit / BTB Time Portfolio Moves Intra – CSDP Min T+018h00 (S) Min T+018h00 (S) Portfolio Moves on RD N/A where elective CA Min T+009h00 (S)10h00 (S) Off-market SLB Min T+115h00 (S-1)17h00 (S-1)Min T+113h00 (S-1)14h00 (S-1) SLB BPMin T+115h00 (S-1)17h00 (S-1)Min T+113h00 (S-1)14h00 (S-1) SLB Rev Substitution Min T+110h00 (S-1)12h00 (S-1)Min T+117h00 (S-1)18h00 (S-1) SLB Returns (Off-market and BPs) Min T+0 (BPs)09h00 (S)10h00 (S)Min T+117h00 (S-1)18h00 (S-1)

16 Off-markets activities current versus future Cont… TypeCurrent Settlement Cycle Reporting Time Commit / BTB Time Future Settlement Cycle Reporting Time Commit / BTB Time Off-market SLB on RD – By Exception N/AMin T+009h00 (S)10h00 (S) SLB BP on RD – By Exception Min T+009h00 (S)10h00 (S)Min T+009h00 (S)10h00 (S) Same day SLB Returns (Off-markets and BP on RD – By Exception Min T+0 (BPs)09h00 (S)10h00 (S)Min T+009h00 (S)10h00 (S)

17 From A risk management perspective agreed to separate controlled clients and proprietary deals Linked to T+3 due to Impact of system Separate custody accounts May be same or different CSDP for custody accounts EOD T+1 a brokers net will be created for proprietary accounts and a controlled clients net for controlled clients Per instrument /per trade type/per settlement day Separation of Controlled Clients from Proprietary accounts

18 Controlled Clients Net SPClient A 1,000 AAA SPSPClient BClient C 200 AAA800 AAA Controlled client net created for DVP 400 AAA shares

19 Brokers Net- Same Broker SPStock Acct A 2,000 AAA SPS Stock Acct B Stock Acct C 200 AAA600 AAA Brokers net created for RVP 1,200 AAA shares P

20 Settlement Allegements EOD T+1 ECS Strate Brokers Custody Acct Controlled Clients Custody Acct Brokers Net Controlled Clients Net

21 Controlled Clients Net SPClient A 1,000 AAA SPSPClient BClient C 200 AAA800 AAA Brokers net created for DVP 400 AAA shares No Securities Compulsory Reverse Substitution

22 Compulsory Reverse Substitution Controlled clients SP Brokers custody Acct 1,200 AAA SP Controlled Clients Acct DVP 400 AAA Reverse Substituted RVP MT AAA MT AAA

23 Daily Reconciliation MSS MT 535 Controlled Clients Custody Acct Brokers Custody Acct

24 Rolling Of Settlement New Leg Process S P NON-CONTR CLIENT A S P BROKER C S P BROKER D S P NON-CONTR CLIENT B 100 AAA 0 NEW CONTRACT NOTE FOR NEW SETTLEMENT DATE WITH ORIGINAL TRADE DATE SETTLEMENT AUTHORITY WILL BOOK SETTLEMENT ORDERS 100 AAA 0

25 Failed Trades Retransactions Settlement Process S P 100 AAA NON-CONTR CLIENT A S P BROKER C S P BROKER D S P NON-CONTR CLIENT B 100 AAA 0 0 COMPULSORY REVERSE SUBS 100 AAA 0 0 VOLUNTARY REVERSE SUBS CONTRACT NOTE CANCELLED SETTLEMENT AUTHORITY WILL BOOK SETTLEMENT ORDERS 100 AAA

26 Failed Trades Retransactions New Leg Process S P NON-CONTR CLIENT A S P BROKER C S P BROKER D S P NON-CONTR CLIENT B AAA 0 NEW CONTRACT NOTE WITH ORIGINAL TRADE DATE 100 AAA RETRANSACT 100 AAA 0 CLAIM LOSS/PROFIT

27 Failed Trades Compensation Settlement Process S P 100 AAA NON-CONTR CLIENT A S P BROKER C S P BROKER D S P NON-CONTR CLIENT B 100 AAA 0 0 COMPULSORY REVERSE SUBS 100 AAA 0 0 VOLUNTARY REVERSE SUBS CONTRACT NOTE CANCELLED SETTLEMENT AUTHORITY WILL BOOK SETTLEMENT ORDERS 100 AAA

28 Failed Trades Compensation Compensation Process S P NON-CONTR CLIENT A S P BROKER C S P BROKER D S P NON-CONTR CLIENT B 100 AAA 0 COMPENSATION PAID 0

29 Copyright© JSE Limited T+3: Barrier 4 – Corporate Actions

30 The types of Corporate Action Events have been broken down into the following categories: Mandatory Events; Elective Events Choice/Voluntary Events; and Warrants Barrier Corporate Action Model Analysis

31 The Corporate Actions Model for T+3 has been devised to adhere to the following principles: Entitlements can be traded on LDT + 1; Payment Date is as close to Record Date as possible (RD + 1) Based on the high-level recommendations from the Giovannini Group and International Organization of Securities Commissions (IOSCO) Best Practice Principles Analysis

32 Corporate Action Events Mandatory Events

33 The minimum required information on Declaration Date for Mandatory Events must be: Last Day to Trade (Cum), Ex Date, Record Date and Expected Pay Date Cash Rates and Share Ratios can be announced no later than Finalisation Date by 12h00. Exceptions to this will be dealt with on a case by case basis. If applicable (Mandatory Security or Mandatory Cash and Security): Delisting Date/Termination Date, Suspension Date, Effective Date New ISIN Market Decision: Event Information Mandatory Events

34 The Market has agreed on the following: Should not all information have been made available on Declaration Date then the cut off date for the Event Finalisation should be no later than 12h00 on Finalisation Date. Exceptions to this will be dealt with on a case by case basis. Record Date will always be a Friday. In the event of a Public Holiday, Record Date will be the previous business day. Pre-Advices will be sent from Strate from 16h00 onwards. Market Decision Mandatory Events

35 New Timeline (all Mandatory Events) Mandatory Events

36 Corporate Action Events Elective Choice/Voluntary Events

37 New Timeline - Elective Events (Excluding Dividend Reinvestments) Elective Events - Choice/Voluntary Events

38 Market Decision: Event Information Elective Events - Choice/Voluntary Events The minimum required information on Declaration Date for Elective Events must be: Last Day to Trade (Cum), Ex Date, Record Date, Election Deadline Date and Expected Pay Date Cash Rates and Share Ratios can be announced no later than 12h00 on Finalisation Date. Default Option and whether Part Elections and/or Restrictions are applicable Elections will be sent to Strate at 13h00 with possible amendments being submitted up until 14h00. Pre-Advices will be sent from Strate from 14h00 onwards. Strate to forward Election Instructions to Transfer Secretary at 15h00

39 New Timeline - Dividend Reinvestments Elective Events - Choice/Voluntary Events

40 The minimum required information on Declaration Date for Dividend Reinvestments must be: Last Day to Trade (Cum), Ex Date, Record Date, Election Deadline Date and Expected Pay Date, SA Rate Conversion Date SA Dividend Rate announced no later than 12h00 Finalisation Date. Dividend rate in foreign currency and whether Part Elections are applicable Restrictions All announcements on Finalisation Date will be made by 12h00. Strate to send Record Date Positions at E.O.D Record Date Elections will be sent to Strate at 13h00 on Election Deadline Date Market Decision: Before Declaration and Finalisation Date Elective Events – Dividend Reinvestments

41 Spreadsheets and Fractions Barrier 4.9 and Barrier 4.3

42 It has been decided that for all companies listed locally, the rounding convention utilised will be to round down all entitlements. Fractional payments will be paid in cash, with a tolerance level to be decided on at a later stage. Spreadsheets will be required for Initial Public Offerings (IPOs). For Foreign and Dual-Listed Companies, their rounding principles/conventions will be applied. Restrictions will be communicated and it will be the beneficial owner’s obligation to observe such restrictions and adhere to legislative requirements of their own jurisdiction. CSD Participants will not monitor this and should an investor remain silent or make an election, it will be deemed to indicate that the investor can receive such entitlements. Market Decision Spreadsheets and Fractions

43 Parked Action Items

44 Parked Action Items It was agreed by all Market participants that the following action items will be parked and discussed at a later stage: The Elimination of Spreadsheets for surplus rights take-ups, and; The impact of tax legislation on the Corporate Actions model for T+3.

45 Securities Lending & Borrowing Increase Liquidity Securities Lending & Borrowing is an enabler for T+3 Focus is on creating more liquidity around Securities Lending & Borrowing:- Education with lenders that they will be protected on any corporate action entitlements – do not have to recall Education that lenders may start lending out entitlements from LDT+1 for PD Increase limits for lending – Pension Funds,etc More lenders Controlled clients loaning out shares

46 Securities Lending & Borrowing Automation Same day Securities Lending & Borrowing Same day Securities Lending & Borrowing returns Collateral movements – securities – Linked to STT Changes to Securities Lending & Borrowing for Corporate Actions Automation of loan confirmations - FIX

47 Securities Lending & Borrowing Settlement Authority Educate the market on the role of the JSE Settlement Authority – settlement related Set up direct arrangements with Pension Funds, etc Possible systems to be implemented

48 Conversion WTFCMTWTFMT TT+1T+2OT+3T+4T+5 TT+1NT+2T+3T+4T+5 TVT+1T+2T+3T+4T+5 ETT+1T+2T+3CA RTT+1T+2T+3CA STT+1T+2T+3 ITT+1T+2T+3 OTT+1T+2 N LDT RDPD

49 Assumptions Limit amount of Corporate Actions No huge market activity – price movements No jobbing across settlement days Migration will not take place over a month end Migration will not take place over a futures close out No public holidays on week of migration

50 Actions Market education on conversion process and requirements Securities Lending & Borrowing Rolling Of Settlement Off-market timelines may be moved to facilitate settlement with no penalties Align timelines where possible before go-live of T+3

51 51


Download ppt "Copyright© JSE Limited 2008 www.jse.co.za Brett Kotze Clearing & Settlement Division 08 February 2010 The move to T+3 1."

Similar presentations


Ads by Google