The sophistication, security and efficiency of clearing and settlement in securities markets has evolved remarkably in recent years. Driven by the concerns of investors facing exposure pending final settlement, a number of eminent international bodies have worked for the introduction of mechanisms aimed at containing and minimising these risks. Of greatest importance has been the work completed by the Group of Thirty ("G30"). The G30 developed nine recommendations (Group of Thirty's International Standards on Clearing and Settlement of Securities Transactions) which were aimed at alleviating risk and improving efficiency. In summary they gave rise to international standards which would:
- shorten the period for matching (or comparison) of trades between members, and between members and selected non-members to no longer than one day immediately after the trade;
- establish central securities depositories in centres where they do not exist to enable book-entry transfers of securities;
- reduce the period for settling transactions to three business days; and
- ensure delivery against payment so that delivery of securities is simultaneous with assured and irrevocable payment.
The JSE clearing and settlement system, whilst being highly advanced compared to many other stock exchanges for many years, does not meet all of the G30 standards today. The JSE is, together with the banking industry, working towards the implementation of those G30 standards which it does not meet.
The movement of paper across borders in international settlements is an inefficient and risky operation where lengthy delays are prone to occur, administrative costs are high and the risk of tainted scrip being delivered into the market is a major concern. Dependence on paper in the form of certificates and transfer documents must therefore be eliminated. The JSE, in consultation with other interested parties, is supporting the implementation of an electronic scrip registry ("ESR") which would be facilitated through a central depository ("CD") as an interim step.
Whilst every care has been taken in the preparation of this article, the JSE is not responsible for any errors or omissions contained therein. Readers should therefore study the original Act, rules and other documents referred to or consult with the JSE before acting on any information supplied.
For further information kindly contact: JSE Public Relations Department, PO Box 1174, Johannesburg 2000. Tel: 377 2200; Fax: 834 7402; or do a text search "Johannesburg Stock Exchange" and "Business Monitor".