Market infrastructure - South Africa
Institutions and organisation
Johannesburg Securities Exchange (JSE)
The JSE, based in Johannesburg, is the primary stock exchange in South Africa, on which all South African equities (including warrants and derivatives) and listed debt instruments are traded; there is no OTC or non-exchange markets for these securities. The JSE electronic book-entry and settlement is performed by Strate.
In 2003, the JSE launched an alternative exchange, AltX, for small and mid-sized listings, followed by the Yield X for interest rate and currency instruments. The JSE then acquired the South African Futures Exchange (SAFEX) in 2001 and the Bond Exchange of South Africa (BESA) in 2009. Today the JSE offers five financial markets namely Equities and Bonds as well as Financial, Commodity and Interest Rate Derivatives.
Cape Town Stock Exchange (CTSE)
CTSE, previously named 4 Africa Exchange (4AX) was founded in 2014 and granted a licence by the Financial Services Board on 1 September 2016. CTSE started trading on 28 September 2017 and is using Strate as its CSD.
CTSE aims to attract issuers and investors who are not served by current incumbent/s or whose needs may be better served through a different exchange model.
A2X Markets (A2X)
A2X is a stock exchange in South Africa and was granted an exchange licence by the Financial Services Board on 6 April 2017.
A2X competes directly with the JSE and provides an alternative platform for companies to secondary list and trade their shares.
All trades executed on A2X are cleared through its clearing engine, A2X Clear, with settlement taking place via Strate and its participants.
Equity Express Securities Exchange
Equity Express Securities Exchange (ESSE) was granted a licence on 11 September 2017 with conditions to operate by the Registrar of Securities Services. The licence was granted on the basis of section 9(1) of the Financial Markets Act.
CSD - Strate
Strate is South Africa's Central Securities Depository. It is an FSB-licenced financial market infrastructure that owns technology to securely hold equities, bonds and money market securities in electronic form so that buyers and sellers can exchange ownership of these securities once they are successfully traded.
Given that records are electronic, rather than transferring physical certificates, Strate records the transaction via book entry. This shareholder database held at Strate is recognised as the legal record of ownership in South Africa.
Strate is an independent company, serving multiple stock exchanges in South Africa as well as their respective issuer clients.
It also facilitates corporate action (such as dividends) payments for those issuers, as well as other services in terms of South African legislation. In addition, value-adding services are available, such as collateral management, IT services and training. It also continues to explore new, advanced and even disruptive technologies that could be identified as new opportunities in the financial markets.
Strate is tasked with the safekeeping and administration of securities and financial instruments on behalf of third parties. It is also responsible for the settlement of these securities - where the corresponding cash is delivered and received to complete a transaction between sellers and buyers of those securities. This custody and settlement role is the core service provided by Strate to stakeholders across the bonds, equities and money markets.
Clearing House - Strate
Strate is also the approved clearing house for the matching, clearing and settlement of all bond transactions through the Strate Bonds Trading System2 operated by the JSE.
Central Bank - South African Reserve Bank (SARB)
SARB, referred to as the Central Bank, regulates all the banks and deposit-taking institutions in South Africa on the basis of the Banks Act, which stipulates minimum capital requirements and other measures to protect investment.
Two new financial regulators came into operation in South Africa, namely, the Prudential Authority (PA) that sits within SARB and the Financial Sector Conduct Authority (FSCA) as part of the Twin Peaks model of financial sector regulation.
The PA, which Deputy Governor Kuben Naidoo has been appointed CEO of, will be responsible for the prudential supervision of banks, insurers, financial conglomerates and certain market infrastructures and for ensuring that these institutions are managed safely and soundly.
Settlement agents
A settlement agent or CSD Participant (CSDP) must be appointed by each market participant to perform electronic net or gross settlement for both funds and securities on behalf of that participant. Settlement agents and CSDPs have direct access to the CSD for securities settlement and have cash clearing accounts with the Central Bank.
Please refer to list of participants on the Strate website.
Standard Chartered Bank - Johannesburg Branch is CBL’s settlement agent/CSDP.
Regulatory structure
The South African financial markets are regulated through the Financial Markets Act no.19 of 2012.
This Act was administered by the Financial Services Board (FSB). The FSB was an independent institution established by statute to oversee the South African non-banking financial services industry in the public interest. As of
1 April 2018, FSB has been transformed into the Financial Sector Conduct Authority (FSCA). FSCA is a dedicated regulator of market conduct for the South African financial services sector. This marks the formal implementation of the Twin Peaks model of financial sector regulation. Bank and non-bank CSD participants are regulated by SARB and Strate respectively.
Other entities who regulate the debt market are as follows:
- Ministry of Finance (National Treasury);
- Financial Sector Conduct Authority (FSCA);
- South African Reserve Bank.
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1. This empowerment replaces the provisions of the Financial Market Control Act (FMCA) of 1989.
2. Strate Bonds Trading System has replaced Universal Exchange Corporation Limited (UNEXcor) following the merger between the CSD, UNEXcor and Strate in 2003.