To ensure South Africa benefits from world-renowned technology, South Africa’s licenced Central Securities Depository (CSD) Strate has entered into an agreement with REGIS-TR, the European Trade Repository owned by Clearstream and Iberclear, to assist in the development of a South African trade repository for over-the-counter derivatives, in accordance with South African regulatory requirements.
According to Anthony van Eden, Strate’s Chief Operating officer, Strate’s philosophy has always been to strategically collaborate with the ideal partners and experts that have a sound track record and can provide the South African market with solutions, solutions which will enhance risk mitigation, improve transparency and align the country to international best practice.
To enable it to bring a Trade Repository that meets international standards as well as one that will benefit the South African market, Strate is collaborating with REGIS-TR. REGIS-TR has already supported the European industry from the inception of the new reporting obligation derived from EMIR.
Founded on December 9, 2010, REGIS-TR is a societe anonyme, incorporated under the laws of the Grand Duchy of Luxembourg, registered with the Trade and Companies Register of Luxembourg and supervised by the CSSF as a Professional of the Financial Sector. Clearstream Banking SA, a legally recognized and established international securities depository, and Iberclear, Spain’s central securities depository, are equal shareholders in the company.
REGIS-TR has offered trade repository services for interest rate swaps since 2010. In 2012, it incorporated foreign exchange, equity, and commodity derivatives. REGIS-TR will provide full reporting services for all asset classes, including credit default swaps in mid-2013. It will provide all relevant data to any permissioned regulatory agency and already makes aggregated data available to the public.
Interest rate swaps represent an estimated 85 percent of the ZAR24 trillion notional value of South Africa’s over-the-counter derivatives market.
Local Trade Repository to solve problems with Financial market
In South Africa, the Financial Markets Act is providing a new framework to regulate the financial markets sector of the financial markets with enabling legislation for a Trade Repository for over-the-counter derivatives. “An approved Trade Repository will bring transparency to the market and greatly enhance regulator’s oversight and ability to respond to market risks or manipulations,” says van Eden.
A Trade Repository for over-the-counter derivatives is a centralised database that maintains a secure and reliable electronic database of the records of open over-the-counter derivatives transactions. The primary public policy benefit of a Trade Repository stems from the improved market transparency facilitated by its record keeping function, the integrity of information it maintains and effective access to this information by relevant authorities and the public in line with their respective information needs. It provides reporting to market authorities and to its customers, as well as aggregated information to the public.
The benefits of a Trade Repository include a quick and timely access to data in a time of crisis, which would safeguard SA’s financial markets. Regulators globally have recognised the need to use a Trade Repository to reduce systemic risk, improve transparency and protect investors.
A Trade Repository is in line with recommendations set forth by the G-20 where all standardised over-the-counter derivative contracts should be traded on an exchange or electronic platform, where appropriate, and cleared through central counterparties by end-2012 at the latest. “This aims to enhance the stability of global financial markets and protect investors and financial institutions in the event of a crisis,” concludes van Eden.
As a member of the G-20, South Africa is committed to and acknowledges the need to conform to reporting of over-the-counter derivatives transactions to enhance regulatory oversight and improve transparency.
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