Settlement process - South Africa

20.04.2023

Settlement cycles

Bonds:

On-market bonds:

T+3, T+2, T+1 and T+0 cycles.

Off-market bonds:

T+6 maximum - T+1, T+2, T+3 cycles. Trades can be rolled for up to three days (for example, a trade booked on a T+1 cycle can be rolled to T+4).

Equities and Warrants:

On-market:

T+3  rolling settlement

Off-market:

No contractual settlement - T+3 cycle. Trades can be rolled until T+9.

Account Transfer:

T+0 or T+1

Money Market:

On-/Off-market:

T+0

Settlement flow

All times in this section are expressed as South African local time (that is, GMT+2, not CET). 

Debt securities

SD-1=T+2:

Client instructions for all standard and T+2 trades that are not received at the settlement agent by the instruction deadline in the Market Link Guide will incur a late reporting penalty on all off-market trades.

The Bond Traders’ Association (BTA) member and settlement agent/CSDP must follow up on missing instructions or scrip shortages with their clients.

SD=T+3:

The settlement agent reports all unresolved problems to Strate for exclusion.

The first settlement run starts at 10:00 on SD, with subsequent settlement runs starting every hour on the hour (or as required under exceptional circumstances; the last settlement run is at 15:15 on SD.

Same-day trades are allowed in the bond market. Client instructions must be lodged with the settlement agent as soon as the trade is concluded, irrespective of whether or not the trade has been reported to the system, and the client must have sufficient stock for same-day settlement at Strate.

Equities

T:

The client inputs the order to sell or buy. Brokers allocate transactions to a client or counterparty or to a broker’s proprietary account.

T+1:

Reporting to client or counterparty.

Without specific notification to the broker by T+1 12:00 midday, the client and/or counterparty are deemed to have accepted the transaction.

Brokers should ensure that no deal adjustments are made after 18:00 on T+1.

T+2:

CSD participants must commit to on-market trades by T+2 15:00 and off-market trades by 15:00 S-1. If trades are not committed to by these deadlines, the broker must manage the potential failure/buy-in process.

T+3:

Settlement day - settlement is effected by the relevant CSD participants of the broker and/or client and/or counterparty and/or JSE settlement authority.

Settlement of debt securities

Debt securities are deposited and cleared electronically through the Strate Bond Trading System.

Strate regulates settlement of off-shore trade (OTS) transactions by settlement agents as follows:

  • The instruction deadline is 15:00 (SA local time) on SD-1 for T+2 and T+3 trades.
  • The reporting deadline to Strate is 18:00 (SA local time) on SD-1.
  • Failure to report transactions by this deadline will result in a late reporting penalty of ZAR 1,000 charged by Strate (see “Penalties in Strate for equities and debt securities” below).
  • Trade Date is a matching criterion so that Strate can better monitor and correctly enforce the late reporting penalty.

Settlement of equities

Only dematerialised securities are eligible for settlement using the Strate’s Southern Africa Financial Instrument Real-Time Electronic Settlement (SAFIRES) system. Settlement occurs on the rolling settlement date. Only on-market trades are contractual.

Within Strate, transfer of ownership of securities and cash is simultaneous. When payment has been made for the securities, ownership is transferred from the seller’s name to the buyer’s name by electronic book entry.

Securities eligible for settlement through Strate are listed on the Strate website.

Physical settlement of unlisted securities (non–Strate-eligible)

There is no official OTC market or trade procedure for dealing with unlisted securities. However, the following procedure is routinely followed on uncontrolled trading (via physical settlement) taking place outside the stock exchange:

  • The client instructs with specific settlement date.
  • The transaction is matched with the counterparty by telephone or email.
  • The agent physically delivers the scrip to the counterparty settlement agent or custodian.
  • Upon physical receipt of the scrip, settlement of scrip and cash, were applicable, is effected.

Partial settlement

Partial settlements are not performed in the Strate settlement environment.

Buy-ins

Equities, on-market

Reverse substitution processing is equated to a buy-in and is applicable to on-market trades only.

All outstanding trades are followed up with both the client and their counterparty until resolved. If the problem is not resolved by 12:00 on SD-2, the broker has until 09:00 T+2 (16:00 to 18:00) on SD-1 to voluntary reverse substitute the trade. Thereafter, the broker is forced to take ownership of the trade and must procure settlement. The trade is cancelled on the account of the client and must be re-booked, by the client, by renegotiating a new trade and settlement date.

Debt securities, on-market

If a trade cannot be committed on settlement date, it will fail and must be re-booked by the client, by renegotiating for a new trade and settlement date.

Registration

All South African securities eligible in CBL are registered under the name Standard Chartered Nominees South Africa (Proprietary) Limited or, if deposited with the CSD, in the name of the CSD’s Nominee.

Duty on transactions

Unless an exemption applies, transactions in South African equities are, in principle, subject to South African Security Transfer Tax (STT). STT is payable, at the rate of 0.25%, upon a purchase of South African equities in the market. Please refer to the Market Link Guide (South Africa).

Penalties

Penalties in Strate for equities and debt securities

Penalties may be charged on instructions relating to On-market, Off-market and Unlisted Equity and Bond securities trades settling through Strate. The penalty structure is documented in the directives SF.1, SF.2 and SF.31.

Most common Strate penalties include (but are not limited to) the following:

SF.1

  • "Unconditional commit of securities", with an underlying penalty of ZAR 10,000 per transaction.

SF.2 and SF.3

  • "Booking of same day orders", with an underlying penalty of ZAR 5,000 per transaction reported to the CSD;
  • "Late reporting of orders", with an underlying penalty of ZAR 1,000 per transaction reported to the CSD after the set time parameter;
  • "Late committing to orders", with an underlying penalty of ZAR 1,000 per transaction committed to after the set time parameter;
  • "Funding of the SAMOS CPL account on S", with an underlying penalty of ZAR 20,000 for failure to fund by 09:00 for the first settlement run or within 30 minutes of receipt of the funding instruction for subsequent settlement runs, and an additional ZAR 10,000 for each additional 30 minutes (or part thereof) during which the SAMOS CPL remains unfunded.

For details and conditions of all Strate penalties (which can vary from time to time), please contact Strate directly as the Strate directives are no longer published on their website.

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1. All directives governing Strate have a two-letter denomination starting with "S" (for example, SF, SC) to distinguish them from JSE directives.

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