Strate’s Collateral Management Services Update

Interest in Strate’s Collateral Management Services continues to grow, as nine local banks have successfully performed scripted testing on the system.

 

The banks participated in scripted market testing of the service to secure the interbank lending market. There was a particular focus on the lending in the ‘the South African Multiple Option Settlement (SAMOS) system position/square-off window’. Over 90 people were trained by Strate.

 

Strate has also submitted motivations to National Treasury and the South African Revenue Service to consider certain tax exemptions to remove the impediments relating to the use of specific securities for collateral. A Working Group has been put in place as a result. The Finance Minister Nhlanhla Nene noted in the 2015 South African Budget Speech that “government proposes to review the tax treatment of the transfer in beneficial ownership of collateral to reduce any negative effects on acceptable business practices and limit the use of collateral in possible tax avoidance arrangements”.

 

Strate has continued its engagements to confirm the next steps to having the dispensations included in the Tax Laws Amendment Bill. Should the amendments be accepted, they are expected to be effective from the beginning of 2016.

 

Looking at the second quarter, Strate and the Association of Corporate Treasurers of South Africa (ACTSA) hosted a conference on collateralisation benefits for Corporates during April. Strate and Clearstream also participated in the Securities Finance Masterclass Conference.

 

To find out more about Strate’s Collateral Management Services, email collateral@strate.co.za.

 

 

BaNCS Market Infrastructure for Money Markets is Underway

In September last year, Strate had announced that it had selected the TCS BaNCS Market Infrastructure (BaNCS MI) solution to replace its money market, bond and equity depository operations.

 

Development and testing for money markets is underway, with the implementation scheduled for the third quarter of 2015. Strate will then turn to the replacement of its current bonds and equities applications onto the new infrastructure. The new BaNCS infrastructure offers the market a streamlined service across all asset classes, as the three systems are consolidated into one. The benefit thereof is that fewer systems will need to be  supported and CSD Participants will have fewer interfaces to maintain.

 

In addition, workforce productivity is expected to improve, as there is less need for users to learn and work in as many different applications as they currently do. This was in line with its strategy of acquiring technology that will introduce further operational efficiencies to South Africa’s financial market.

 

 

iValue Entrepreneurship Programme Bears Fruit

The shortlist of the learners participating in the final phase of the iValue Entrepreneurship Programme has been announced.

 

Nineteen grade 11 learners from Kwena Molapo High School near Lanseria addressed a panel of four judges on 17 April 2015, using their newly acquired knowledge of business management and entrepreneurship to develop their feasible ideas. Over recent months, they had formed groups to work hard on their ideas and present them to the panel with the hopes of being selected to receive start-up capital for their business plans. Two of these groups – Matrix Play and iHealth – were announced as the winners. Matrix Play will be an internet service provider to learners at their school, while iHealth aims to accelerate living a healthy life style for schoolchildren.The iValue Entrepreneurship Programme, initially launched in 2014 as a pilot project, was targeted at a group of grade 10 learners with the aim to have at least five of the learners become entrepreneurs within the next five years.

 

With the help of second year students completing their Diplomas on Small Business Management at the University of Johannesburg, the learners have spent the past year developing their skills. Learners have been empowered to understand and apply entrepreneurial knowledge, skills and principles in their entrepreneurship projects, as well as identify viable entrepreneurial opportunities within their communities.

 

According to Carole Podetti Ngono, the Founder and Managing Director for the Valued Citizens Initiative, “The learners now have the entrepreneurial spirit and skillset to implement their business ideas successfully. Over the coming months, they’ll be afforded the opportunity of gaining real-world experience of running a business and forming relationships with stakeholders.”

 

As one of the Programme’s sponsors, South African Central Securities Depository Strate strongly believes the iValue initiative is aligned to government’s important objectives of addressing youth unemployment to foster sustainable economic growth. “Not only is South Africa confronted with high levels of unemployment, there is also an increasing number of discouraged work seekers among young people. Only some 7% of successful grade 12 learners in South Africa find employment in the formal sector. There is an urgent need for the promotion of entrepreneurship as a potential solution to youth unemployment, which is why initiatives such as the iValue Entrepreneurship Programme are vital. It enables young people to empower themselves, so that they can successfully contribute to the economy and inspire the people around them to follow in their steps and nurture their own entrepreneurial spirit,” explains Tanya Knowles, the Head of Strate’s Project Innovation and Business Services Division.

 

To ensure that the Programme continues to be sustainable, the learners will be tracked over a five-year period to ensure the successful implementation of their business ideas. Key Performance Indicators will be developed and measured on an annual basis. These measures will include operational areas, such as profits margins, growth of the business, job opportunities created, contracts with vendors, marketing exposure and sustainability.

 

Following the success of the pilot programme, the Valued Citizens Initiative will continue to search for learners to enrol in future iValue Entrepreneurship Programmes. The University of Johannesburg, Faculty of Management has also identified the need to tailor make a new programme and curricula to entrepreneurship. If successful it will be among the first tertiary institutions in South Africa to launch Bachelor in Entrepreneurship at undergraduate level.

 

“Learners who partake in the iValue programme will be afforded the opportunity to get a bursary to these new entrepreneurship programmes at UJ. In addition, the rest of South Africa or any prospective entrepreneurs will also be able to empower themselves and nurture their skills to become vital contributors to their own success, and in turn South Africa’s socio-economic development,” says Joyce Sibeko, Faculty Advisor for Enactus at the University of Johannesburg.

 

 

Strate enhances its risk management capabilities with intelligent documentation

A brand is one of the important components within a company’s reputation management strategy. South African central securities depository, Strate, recognises its investment in its reputation, seeking to own a brand that aligns to its message of instilling trust and confidence among its stakeholders in the financial market.

 

Brand consistency and the efforts to maintain quality and control of the corporate identity, through centralised brand management, ensure compliance and cost savings.

In a two-month project in which CompuBrand, a Britehouse software business unit, standardised and made 15 intelligent document templates for Strate, the central securities depository deepened its own compliance, risk mitigation and credibility.

 

Strate is internationally recognised as an independent financial market infrastructure (FMI) providing custody, settlement and data services to stakeholders. In the process, it contributes to South Africa’s standing as an investment destination of choice.

 

Owned by South Africa’s big four banks, the Johannesburg Stock Exchange and Citibank, Strate uses state-of-the-art technology, its international expertise and its risk management framework to support and promote the safety and efficiency of the country’s financial markets.

 

The company provides electronic settlement of equities and bond transactions concluded on the Johannesburg Stock Exchange. It also settles transactions in money market securities and has recently introduced a collateral management service. It offers an asset servicing product range that augments the services it offers to issuers in terms of the Companies Act (2008) and the Financial Markets Act ((FMA) 2012).

 

The need

 

“As with most companies, however, in spite of its business and technological sophistication, Strate had an Achilles heel with regard to its corporate documentation,” says Julia Coulson, founder and director of CompuBrand, a company that provides software solutions for managing brand standards and content within documents and electronic communication, also creating intelligent and automated MS Office documents.

 

“There is a tendency to think that branding on letterheads, proposals, e-mails, and other documents in daily use is simply a hygiene factor; that consistency of the way the branding is applied across all documents is a nice to have rather than a direct contributor to the bottom line, to risk mitigation, and to corporate integrity.

 

“In fact, if you don’t have a system whereby employees are prevented from applying the corporate identity in random ways and whereby governance factors, such as the list of directors and company registration, are strictly controlled, then your company is at both financial and compliance risk.

 

“Strate recognised this and set about putting in place a system of templates that would enforce the correct use of its corporate information on documentation and maintain its corporate identity in the correct and desirable form.”

 

The solution

 

The templates, created by Compubrand in Microsoft Office, have been rolled out over all of Strate’s Word, Excel, and PowerPoint instances. They have been loaded into SharePoint, which Strate uses as its Intranet, and the company’s 150 employees have been trained on how to access and use them.

 

The business benefits

 

Strate’s head of project innovation and business services, Tanya Knowles, says that although CompuBrand has proprietary software that enables organisations to put on their users’ screen a ribbon from which they can then access and use templates, as a relatively small company, Strate did not feel the need for the full system.

 

“For us, as an FSB licensed entity, the main business benefit we were looking for was the ease of governance in our corporate documentation, and we got this from CompuBrand’s capabilities.

 

For instance, having the assurance that our list of directors would always be up to date on letterheads, or that disclaimers in presentations would be correct, helps us mitigate our own risk.

 

“It also helps to underpin our risk-management framework, which sits at the core of every service that we provide to the market. Our corporate image and identity is no different and we have to keep walking the talk.

 

“In that context, CompuBrand gave us the significant additional business benefit of consistent branding across our corporate documentation and communications. We refreshed our brand earlier this year and CompuBrand enabled us to roll out the latest corporate identity within our communication formats and across our applications. Obviously, in terms of marketing collateral, this kind of consistency is important for a number of reasons. In our industry, however, consistency is essential to creating confidence in our products and services.

 

“CompuBrand also customised their products and services to our budget – and our timelines. And, overall, they have enabled us to maintain our corporate document governance and branding with very few resources.”

 

The process

 

Samantha Joubert says it was possible to complete the creation of the Eligibility templates in only two months, because of the commitment and close involvement of Strate’s team. “We were briefed in-depth and accurately at the beginning, and feedback during the project was immediate and relevant. When a client is that involved, a project goes very smoothly.”

 

CompuBrand provides assistance to Strate, when required for template updates, on a time and materials basis, as defined in a service level agreement.

 

This press release was issued on 24 March 2015 by the Brighthouse Group via ITWeb’s Virtual Press Office. 

 

 

What Does Strate Do?

We’ve put together an infographic to show you exactly what Strate does as a South African Central Securities Depository…

 

Liquidity Alliance will Provide Worldwide Collateral Access to T2S

When the European Central Bank’s pan-European settlement platform TARGET2-Securities (T2S) goes live in waves from 2015 to 2017, the Liquidity Alliance members will benefit from access to the future pan-European liquidity pool T2S will create. Streamlined settlement will integrate respective assets for smooth collateral management activities. Iberclear, the Spanish Central Securities Depository (CSD), and Clearstream’s CSD in Germany, Clearstream Banking AG, will act as the gateway into T2S for the entire Liquidity Alliance.

 

The Liquidity Alliance will thereby add a global dimension to what the European Central Bank had conceived as a purely European project. T2S will not only make cross-border settlement and respective collateral flows in Europe more attractive, but will also boost collateral liquidity both within Europe and globally.

 

Jesús Benito, Chief Executive Office of Liquidity Alliance member Iberclear, says, “The Liquidity Alliance’s initiative of providing worldwide collateral access to T2S is a major milestone in its history. We are proud to be  a key part of this new facility, which will allow all members to tap the huge collateral resources T2S will make available. In this way, we will be able to maximise the full potential of T2S, enhancing its capabilities and extending its reach at a time when the efficient access and use of collateral has become a priority.”

 

The Liquidity Alliance, the global association of market infrastructures delivering collateral management services to their markets through a common platform, will offer this access to T2S when it extends its services beyond domestic markets to provide cross-border collateral mobilisation in real time. In other words, the Liquidity Alliance is planning to extend the offering to include offshore assets for the coverage  of domestic exposures as well as to mobilise domestic assets for the coverage of offshore exposures.

 

The Liquidity Alliance has already developed concepts to use offshore collateral for the coverage of domestic exposures. This will also enable Liquidity Alliance members to use collateral their customers hold in T2S markets to cover exposures in their home markets. The Liquidity Alliance will deliver such cross-border solutions to overcome collateral fragmentation by using domestic collateral to cover international exposures and vice versa.

 

Monica Singer, Chief Executive Officer of Liquidity Alliance member Strate, the South African CSD, said, “We are very pleased with the prospect of having access to T2S for our collateral management offering. While we had already been following the project with interest from a distance, we did not think we could benefit directly.  Our Liquidity Alliance membership now opens up a great opportunity to access T2S and we are confident it will greatly streamline the activities of our customers in Europe.”

 

When Clearstream connects to T2S in wave three on 12 September 2016, it will also make Eurobonds available  on T2S. This means that Liquidity Alliance members will also be able to access this important asset class for their customers. Iberclear will connect to T2S in wave four. T2S brings further advantages for collateral management: European domestic and international assets can be consolidated into a single pool of liquidity. As a result, Liquidity Alliance members will be able to seamlessly transfer collateral between CSD (T2S) accounts and ICSD accounts for their customers. 

 

Clearstream has commissioned two studies to help customers make the most of T2S. A study by PricewaterhouseCoopers (PwC) in 2013 revealed that the benefits of T2S go far beyond increasing cross-border settlement efficiency. In addition to greater mobility of collateral, there is plenty of room for streamlining the custody chain and thus reducing risks therein.

 

Stefan Lepp, Member of the Executive Board and Head of Global Securities Financing at Liquidity Alliance member Clearstream, the (I)CSD, said, “Clearstream has long been at the forefront of uncovering hidden benefits of T2S for the market. We recognised its immense advantages early on and were one of the first infrastructures to join and to develop a clear T2S pricing strategy. It is only natural for us to not just bring the best of T2S to our customers but also to our global partners in the Liquidity Alliance.”

 

A 2014 study by Oliver Wyman revealed the T2S benefits banks can unlock by consolidating their securities and cash holdings in Europe directly with CSDs and central banks. Complementary case studies revealed that brokers, asset managers and banks could save between EUR 30 million and EUR 70 million annually if they take timely action to delayer* and consolidate assets across major T2S markets.

 

Thanks to the access to T2S via Iberclear and Clearstream, the Liquidity Alliance members will also reap these benefits for their customers, which were previously only available to financial institutions in the T2S markets.

 

*The delayering refers to this: The European post-trade landscape is highly fragmented with multiple layers of intermediation that create inefficiencies, risks and costs.

 

 

Liquidity Alliance Implements Next Generation of Customer Connectivity

The Liquidity Alliance, the global association of market infrastructures delivering collateral management services to their markets through a common platform, has announced the implementation of a new customer connectivity solution. The new interface was developed on the basis of experience and feedback received from clients using the underlying collateral management solution since its introduction in 2011.

 

The ongoing need for market participants to adapt their collateral management practices to new regulatory rules and changing business models has led the Liquidity Alliance to significantly upgrade its customer connectivity solution. The new front-end will deliver enhanced transparency and further advanced management tools for the collateral transactions included in the services offered by the Liquidity Alliance members. In addition, there will be much more flexibility to dynamically adopt the solution to new customer needs surfacing over time.

 

Having been the first entity to adopt the Liquidity Alliance collateral management solution back in 2011, Cetip, the Brazilian central securities depository, is currently preparing the launch of the new connectivity interface in November 2014 as a pilot for the entire Liquidity Alliance. The other Liquidity Alliance members – ASX (Australia), Clearstream (Luxembourg and Germany), Iberclear (Spain) and Strate (South Africa) – are also part of the subsequent rollouts, which will bring the benefits to customers across the globe from 2015 onwards.

 

Fabio Zenaro, Products and Business Executive Manager at Cetip, said, “We led the way by implementing the system in 2011 and we have developed with Clearstream a pioneering solution that is a blueprint for other market infrastructures across the globe. With over three years of experience in operating our collateral service for Brazil, we consider it very important to continue bringing innovation to our clients.”

 

Stefan Lepp, Member of the Executive Board and Head of Global Securities Financing at Clearstream, said, “Being part of the Liquidity Alliance with its global reach has enabled us to understand customer requirements even better and to define superior solutions to service their needs together with our partners. As the technical solution provider, Clearstream is pleased to deliver the next generation of customer connectivity which will bring benefits to all current and future Liquidity Alliance members and their clients.”