Settlement services - South Africa
Definitions
An on-market trade is executed on the stock exchanges and subject to the rules of the exchange.
An off-market trade is not concluded through the stock exchanges and is reported by the seller and purchaser of the securities to the relevant CSD participant for settlement through the CSD.
The processing of these two types of trade may differ as mentioned in this guide and in the Market Profile - South Africa.
Pre-matching service
The table below summarises CBL’s pre-matching service for external settlement instructions, as well as the pre-matching method and start time in the market. For details of CBL’s pre-matching services, see Pre-matching services for external settlement instructions.
| Service offered | Method employed | Start (local time) | |||
| Debt securities | |||||
Immediate Release Flag available | Manual via telephone | SD-3 | |||
| Equities | |||||
Immediate Release Flag available | Automated through Strate | SD-2 | |||
| Connectivity medium | Instruction format a |
Xact Web Portal | Tick to enable the "Immediate Release" option. |
Xact via SWIFT and Xact File Transfer | Field :22F::STCO/CEDE/IREL |
a. Not applicable for non-dematerialised securities.
Procedures for domestic counterparties
Procedure for the domestic counterparty | Deadline |
Debt securities | |
Domestic counterparties should:
| Market deadline |
Equities | |
Domestic counterparties should:
Example: :22F::BENE//NBEN or omit (default is change in beneficial ownership) | Market deadline |
Customers and counterparties making physical deposits in favour of a CBL account should:
Note: The receiving CBL customer should issue a receive free instruction mentioning "physical deposit" in the optional wording. | No specific market deadline is applicable on non-dematerialised securities. |
Allowed countervalue difference
A maximum difference in countervalue of ZAR 350 is allowed for the matching and settlement of against payment transactions with domestic counterparties. In the case of a discrepancy, the seller’s amount will prevail.
Specific settlement rules / settlement restrictions
Settlement restrictions
Against payment transactions in all eligible South African securities with domestic counterparties can be effected in ZAR only.
Account transfers
For account transfers, customers who want to process transfers between their own accounts, either internally or externally, on the South African market should instruct as follows.
Account transfers will be permitted provided that they are free of payment and there is no change in beneficial ownership.
| Xact via SWIFT and Xact File Transfer | Xact Web Portal |
Settlement Transaction type: :22F::SETR//OWNI or OWNE | Sec. transaction type: OWNE - External account transfer or OWNI - Internal account transfer |
:22F::BENE//NBEN | Beneficial ownership: No |
:22F::STAM/STRA/USTN | Stamp duty tax basis |
Note: Beneficial ownership and stamp duty details are not required for debt securities trades.
Securities lending in the domestic market
Customers entering into securities lending trades in South Africa are required to ensure that the following fields are instructed as follows:
| Xact via SWIFT and Xact File Transfer | Xact Web Portal |
Settlement Transaction type: :22F::SETR//SECL or SECB or COLI or COLO | Sec. transaction type: SECL - Securities lending; or SECB - Securities borrowing; or COLI - Collateral In - Held by Collateral Taker; or COLO - Collateral Out - Held by Collateral Giver |
:22F::BENE//NBEN | Beneficial Ownership: No |
:22F::STAM/STRA/USTN | Stamp duty tax basis |
Note: Beneficial ownership and stamp duty details are not required for debt securities trades.
Off-Market Repo
The following fields must be completed for Off-Market Repo:
| Xact via SWIFT and Xact File Transfer | Xact Web Portal |
Settlement Transaction type: :22F::SETR//REPU | Sec. transaction type: REPU - Repo |
:22F::BENE//NBEN | Beneficial Ownership: No |
:22F::STAM/STRA/USTN | Stamp duty tax basis |
Note: Beneficial ownership and stamp duty details are not required for debt securities trades.
Portfolio transfers
Portfolio moves are defined as free of payment transfers, resulting in no change in beneficial ownership, due to a transfer of portfolio between two local custodians (CSDPs) or within the same custodian where the customer uses another ICSD or global custodian. The following fields must be completed for portfolio transfers:
| Xact via SWIFT and Xact File Transfer | Xact Web Portal |
:70E::SPRO//Portfolio Transfer | Settlement instruction processing additional details: Portfolio Transfer |
:22F::BENE//NBEN | Beneficial ownership: No |
:22F::STAM/STRA/USTN | Stamp duty tax basis |
Note: Beneficial ownership and stamp duty details are not required for debt securities trades.
Rolling of off-market trades
In the event that CBL receives an off-market instruction after the cutoff for reporting orders to the CSD, or the orders do not match by the cutoff, CBL will facilitate the settlement process by reporting the off-market instruction to the CSD for the next available settlement date.
This facilitation process may continue for a maximum of five business days, for equities and for bonds, after the requested settlement date of the original instruction.
Instructions for bonds or equities that fail to settle after T+10 will be cancelled and purged from the system. Customers who want to settle the instructions will be required to input a new instruction with the same trade date as the original instruction but a new value date agreed with the counterparty. In such cases, the trade will attract a penalty of ZAR 1,000 for each day counted after T+10.
Such penalties can be waived for trades that fall outside the normal bonds settlement cycle (for example, Repo, Reverse Repo, Sell Buy Back and Buy Sell Back). To enable the onward application to the Regulator for such a waiver, customers are requested to specify the eligible trade type in the Type of Settlement Transaction field of their settlement instructions.
Rolling of on-market equities trades
The rolling of on-market trades is managed by the stock exchange. Transactions may only be rolled twice. Each rolling of settlement will default to a T+3 settlement cycle where the original trade date will be maintained. Failure to secure commitment for the transactions to settle on the second rolling will require the relevant Settlement Authority to invoke either the Retransactions or Compensation procedures. Margin will be held until the future rolling of settlement has settled.
If CBL is notified of a rolling of an on-market trade, the customer will receive a cancellation advice and respective allegement notification with the original trade date and a new settlement date as determined by the stock exchange. The customer will need to input a new instruction with original trade date and settlement date as determined by the stock exchange.
Late instructions for debt instruments
Specifically for bond instructions, CBL will contact the customer if a late instruction is received and settlement is still possible for the stated settlement date. In such cases, the customer has the following options:
- Proceed with the settlement of the late instruction whereby the customer will assume the liability for the fine/transgression of ZAR 5,000 per transaction imposed by Strate.
- Roll the transaction to the next possible settlement date.
If choosing the first option, the customer must send a MT599 to CBL by 10:30 CET stating to proceed with the late settlement and accept the Strate fine. Should CBL receive any MT599 between 10:30 CET and 12:00 CET, the request shall be handled on a “best efforts” basis with its subcustodian. In the event that no instruction is received or the request is not successful, the trade will automatically roll to the next possible settlement date.
Penalties
Penalties in Strate for debt securities
For any penalty related to late instruction or late reporting, CBL will pass the charge directly on to the appropriate customer. To avoid these penalties, customers must send their settlement instructions before the instruction deadline.
CBL has been granted permission by Strate that off-market bond securities transactions may conform to a same day settlement cycle and that these transactions must be reported on SD by 12:00 and committed by 13:00 (South Africa time), in order for the late reporting/committing fines to be waived.
Same day settlement means a T+3, T+2, T+1, T+n transaction reported to Strate on the same day on which settlement occurs.
Penalties in Strate for equities
For any penalty related to off-market equity trades settled through Strate, CBL will pass the charge directly on to the appropriate customer. To avoid these penalties, customers must send their settlement instructions to CBL, as follows:
Same day
- To avoid penalties, booking of off-market same day orders must reach CBL on time as late orders will attract a penalty of ZAR 5,000.00 per transaction leg reported to the CSD after the market deadline. Same day orders in respect of account transfers, portfolio moves, and securities lending transactions should always state that there is no change in beneficial ownership in order to conform to market practice.
- Unauthorised account transfers, lending account transfers and portfolio moves on Record Date are prohibited and will incur a penalty of ZAR 10,000.00 per transaction leg.
Late reporting of off-market orders
Any off-market order booked after the market deadline will incur a penalty of ZAR 1,000.00 per transaction leg.
Late committing of off-market orders
Any off-market order committed after the market deadline will incur a penalty of ZAR 1,000.00 per transaction leg.
For further details on the above and other Strate penalties, please refer to the Penalties section of the Market Profile (South Africa).
Duty on transactions
South African equities are, in principle, subject to South African Securities Transfer Tax (STT) unless an exemption applies. STT is payable upon purchase of South African listed and unlisted equities with a change of beneficial owner.
STT is payable, by the buyer. It is calculated on the market value of the securities at a rate of 0.25% and is imposed on registration, following a change in beneficial ownership.
CBL will levy STT on external receipts of equities where no exemption is claimed.
Impact of STT on instruction formats
External receipt instructions for settlement must indicate the tax status of the transaction with regard to the STT payable on listed and unlisted equities. This is mandatory and a matching criterion (that is, trades will not match unless both buyer and seller provide identical STT status information).
It is most important that both parties to the trade are aware of this requirement and agree at the outset on the appropriate tax status of the transaction.
The following table shows the instruction details to be considered by customers in relation to STT:
| Status | Required input | Remarks | ||
| Xact via SWIFT and Xact File Transfer | ||||
STT payable | None | |||
STT not payable | :22F::BENE//NBEN :22F::STAM/STRA/USTN | No change in beneficial ownership Exempt from STT | ||
Payment of duty
For external receipts of South African equities, the customer’s ZAR account will be debited with STT as soon as the duty has been paid to the South African tax authorities, that is, during the month following the month in which the transaction took place.
If the South African tax authorities question or make inquiries in relation to any details of the customer’s transactions, including the eligibility for exemption, it is the responsibility of the customer to provide CBL with all required explanations and/or documentation.
By sending CBL an external receipt instruction for securities subject to South African duty, the customer is deemed to indemnify CBL for any taxes, penalties, interest thereon and other costs that CBL may incur as a result of CBL’s reliance on the information included in the customer’s instruction, including the claim to be entitled to exemption from the duty.
Partial settlement
Partial settlement is not applicable in the Strate settlement environment and customers that require that a transaction settle no later than the agreed settlement date must inform their counterparty that all relevant securities due to be delivered to CBL are to be delivered by settlement date.
Back-to-back processing
Back-to-back processing is available for transactions in all dematerialised securities eligible in this market. If both the customer and the domestic counterparty meet their settlement obligations and fulfil the market's back-to-back requirements within the relevant deadlines, the linked receipt and the linked delivery will settle with same-day value. To benefit from this functionality, customers must ensure that their back-to-back instructions contain details in the correct format for the connectivity medium used, as follows:
| Connectivity medium | Pool ID format | Field(s) to be used |
Xact via SWIFT and Xact File Transfer | :POOL//16x a and :SETR//TURN | Field :20C: sequence A1 Field :22F: sequence E |
a. The reference (16x) must neither start nor end with a single slash ’/’ nor must it contain two consecutive slashes ’//’.
Note: Where back-to-back instructions are received late, Strate penalties are charged and reported to the CBL customer for each leg (see Penalties above).
Management of failed instructions
Domestic instructions remain in suspense until they settle or until they are cancelled. CBL reserves the right to cancel an instruction with a domestic counterparty that has not settled by the fifth domestic business day after the day on which the instruction was released to the depository for settlement.
New issues settlement
Customers should advise the domestic issuing agent to deliver the securities to SCB on the day on which the new issue is distributed.
Customers must instruct CBL with a receipt free instruction. For confirmation times, please refer to Settlement times.