Most Read Contributor in South Africa, September 2016
On 22 April 2016, the Financial Services Board
("FSB") released a set of proposed
amendments to the Johannesburg Stock Exchange
("JSE") Derivatives Rules in Board
Notice 49 of 2016.
Historically, margin has been provided in cash and paid by the
client to the JSE member who then pays the JSE. The proposed
amendments would allow market participants to post collateral
directly to the JSE by pledging securities in accordance with
section 39 of the Financial Markets Act, 2012
("section 39"). It remains to be seen
how members will practically effect the pledges to the JSE, while
still following the strict wording of section 39 and minding common
law principles relating to pledges.
In light of the JSE accepting pledges of securities, the
proposed amendments also aim to enable the JSE to draw on its
liquidity facility to settle a defaulted position, where the JSE
has sold the pledged securities of defaulting clients, trading
members and/or clearing members pursuant to a default, and the JSE
is awaiting the proceeds of the sale. It is envisaged that the
amount to be paid by the JSE on behalf of defaulting market
participants would be limited to the price at which the securities
are sold, less any costs and fees incurred as a result.
The proposed amendments provide that parate executie
(the right of a creditor to immediate execution without court
sanction) will be expressly permitted in order to settle trade or
position-relation obligations. This means that any securities
pledged by a defaulting party would be sold at a market-related
price (at the time of such sale) within three business days from
the date of default, without the intervention of a court.
Should you have any objections to the proposed amendments, you
may submit comments to the Registrar of Securities Services, at
Michael.Kabai@FSB.co.za, before 6 May 2016.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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In the milieu of global financial markets, securities of various types are often classified as either ‘listed’, ‘unlisted’ or ‘quoted’.
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