EQUITIES
The successful introduction of the Johannesburg Equity Trading (JET) system in the 1990's highlighted the deficiencies in the JSE's paper-based settlement system. Strate was introduced to the market to facilitate the dematerialisation and electronic settlement of the equities market. Shares were no longer traded on an open-outcry trading floor and this contributed to a massive leap in the number of trades each day. Back-office support services were incapable of handling this increase in daily transactions efficiently in a paper-based environment. The transition to an efficient electronic settlement system has increased market activity and has improved the international perception of the South African market by reducing settlement and operational risk in the market, increasing efficiency and ultimately reducing costs. Accordingly, by heightening investor appeal, Strate enables South Africa to compete effectively with other international markets, and not just those of emerging markets.
BONDS
Prior to the 1990s, bond trading in South Africa took place via a trading floor or a screen and telephone system with both parties agreeing on prices and amounts to be bought and sold. With the growth in turnover and value, settlement risks also grew. In 1989, the bond market participants (consisting of banking groups, large issuers, stockbrokers and a number of major financial institutions and intermediaries) formed a voluntary association called the Bond Market Association (BMA) to facilitate the development of a self-regulated bond market exchange. That same year, the major clearing and bond settlement banks and the Reserve Bank created UNEXcor with the express purpose to develop an electronic settlement system using a CSD. The same shareholders got together to form CD Limited in 1991. In May 1994, UNEXcor was appointed as the Clearing House for the South African bond market. The first full electronic settlement through UNEXcor and CD took place on 26 October 1995. In 2003, UNEXcor merged with Strate to become South Africa’s only CSD.
MONEY MARKET
An initiative was established by a number of market participants to address the electronic settlement of money market securities. The Money Market Forum was established and a Blue Print was issued in 2002 for the dematerialisation of money market securities. UNEXcor was awarded the system development contract and following the Strate/UNEXcor merger, Strate assumed the responsibility for the delivery of this project. In conjunction with extensive market consultation, Strate developed the Business Requirement Specification documents. Tata Consultancy Services (TCS) was employed on behalf of Strate to develop the code for the project. Successful market scripted testing of Version 1 was completed in October 2008 and Rand Merchant Bank issued the first electronic security to Strate via FirstRand Bank in November 2008. In April 2009 the Money Market Securities System code enhancements were effected and market participants commenced testing immediately thereafter. The South African market implemented the electronic settlement of newly issued money market securities in the latter half of 2009.