Thursday 29 May 2014 marked the 12th Cell C Take a Girl Child to Work Day® annual campaign targeted at Grade 11 South African girl learners, giving them the opportunity to visit a place of work and to experience first-hand, the “world of work”.
We would like to thank all the learners for visiting Strate. We trust they took away the knowledge and insight that they needed to prepare themselves when they enter the workplace. Here are a few photos from the day:
South Africa’s Central Securities Depository (CSD), Strate, has invested over R100 000 as part of its corporate social investment to build financial literacy among disadvantaged learners and teachers in its community.
On 16 May 2014, Strate together with Full Value Financial Services launched a Financial Markets and Instruments course for eleven Grade 10 learners attending Vuleka Sekolo Sa Borokgo (VSSB), a school that caters for previously disadvantaged learners.
“The course content will be presented by SETA-accredited trainers over seven sessions made up of two hours per session, and it will empower learners and their teachers to make better financial decisions and understand the consequences of their actions. Both learners and teachers will attend the course, which will consequently enable them to empower the communities in which they live with what they have learnt,” says Tanya Knowles, Strate’s Head of Corporate Affairs.
VSSB Principal Dave Rossouw explains that the initiative is centred on educating the community how to be financially independent. “The community’s financial literacy is of utmost importance to us, as well as to Strate and Full Value Financial Services, as the sponsors and trainers of the programme respectively. That is why we are also empowering eleven teachers as well and educating them on topics such as basic financial skills, retirement, estate planning, insurance, financing budgets and saving methods. They can then use this knowledge themselves and pass it on to others.”
Full Value Financial Services’ course facilitators include people who were former traders. As the accredited
services providers, they will host the classes at VSSB from May until August 2014.
South Africa will be following a global trend to reduce its settlement cycle for equities to align to global best practice. The equities transaction settlement cycle will reduce from the current five business days after the trade date (T+5) to three business days after the trade (T+3).
Shorter settlement cycles are known to reduce risk and improve liquidity due to the earlier release of funds, according to Strate’s Head of Custody & Settlement, Iann Seymour-Smith.
CSDs across Europe have been moving to shorter settlement cycles following proposals published by the European Commission during 2013. Known as the Central Securities Depositories Regulation (CSDR), the proposals aim to improve settlement efficiency across the region and have securities transactions settle within two days after the date on which a trade is executed (T+2).
“South Africa’s financial markets have been preparing for the move to shorter settlement cycles in line with global best practice. It is currently working on a project to move to T+3 for equities, which is expected to be implemented next year. While we understand that some international markets have moved to T+2, a decision has been made to move to a T+3 settlement cycle for South Africa, as such a large jump from T+5 to T+2 may result in higher fail trade rates – something which our country can be proud to say that, to this date, it has not experienced in on-market transactions,” adds Seymour-Smith.
According to data provided for by the Global Custodian Annual Survey of Agent Banks, trades that fail to settle on time can cost up to US$2.9 billion for equities. “As a market aiming to attract investors to the country, South Africa’s history of no on-market failed trades has played a key role for investment,” he adds.
Seymour-Smith concludes that the market participants and Strate have been supporting the country’s important move to reduce its settlement cycle as part of the JSE’s T+3 Project, making it a top priority for the South African financial markets.
Strate supports a number of worthy causes that have a positive impact on people’s lives and their futures.
Each year, the company continues to show the care and support for those in need and encourages its staff to get involved too. During 2013, it supported initiatives linked to empowerment, development and education, as well as other charities close to the heart of its employees.
It contributed 1% of its 2012 Net Profit After Tax to a number of charities and Corporate Social Investment (CSI) initiatives, some of which are listed in the table below.
Strate’s regulator, the Financial Services Board (FSB), has approved the amendments to the Central Securities Depository (CSD) Rules to have them aligned to new legislation.
“Following the implementation of the Financial Markets Act, 2012 (FMA), the CSD Rules had to be adjusted to align to the new legislation as well as to the National Payment System Act and the Insolvency Act,” explains Maria Vermaas, the Head of Strate’s Legal & Regulatory Division.
She explained that the section relating to Duties of Participants (within Section 5) had to be revised to include additional clauses, while the Accounts section (Section 6) was also modified to provide further clarity on the irrevocability of settlement instructions.
New sections have been added to the amended CSD Rules (Sections 15 and 16 respectively) for Complaints Procedures and Procedures for Management of Participant’s Insolvency Proceeding. While the amended CSD Rules became effective the day they were published in the official Government Gazette, being 14 February 2014, there are a number of clauses that will only take effect on 13 May 2014. These are clauses 5.1.6, 5.1.8, 5.7.1 and 5.7.3.
The revised CSD Rules are available on the Regulatory Environment section of Strate’s website. Click here
to view the CSD Rules.
Strate has become one of the sponsors of an exciting initiative called iValue, which aims to promote entrepreneurship within previously disadvantaged schools, where selected qualifying learners will participate meaningfully in economic activity.
“Given that South Africa is confronted with high levels of unemployment, Strate did not hesitate to partner with iValue’s Entrepreneurship Programme to invest and empower learners so that they can successfully and sustainably contribute to the economy and provide for their families. The iValue Programme was ideally suited to achieve the investment in skills and socio-economic development that aligns with Strate’s objectives,” says Strate’s Head of Corporate Affairs, Tanya Knowles.
iValue explains that the concept of its Entrepreneurship Programme is to involve 20 grade 10 learners per school and follow them into grade 11 in a process that will enhance their entrepreneurial spirit.
Knowles explains: “As part of the programme design, the learners will get to understand entrepreneurship and life skills, and then develop a business plan. The five best plans will then be put to the test, as learners will implement their business ideas with start-up capital to run their small businesses successfully.”
At university level, with the Faculty of Management at the University of Johannesburg, two students completing their Bachelors of Commerce Degrees or Diplomas on Entrepreneurial or Small Business Management will support the growth of a group of ten learners. Two groups will be formed to benefit from a competitive environment. During the second year, each individual will have to present their business plan and the five more relevant and accurate per school will be provided a start-up, capital, which they will have to pay back at the end of the year.
In conclusion, Knowles says that iValue’s story of nuturing an enterprising spirit among young learners is one that needs to be acknowledged, given that only some 7% of successful grade 12 learners in South Africa find employment in the formal sector. “The future of our economy depends on how we as a nation raise and educate our youth. Therefore, the investment in education and skills transfer should be a non-negotiable item on every corporate agenda.”
A Memorandum of Understanding (MoU) has been signed between Strate and Turkish CSD Merkezi Kayıt Kurulusu (MKK) to foster the development of communication channels and support the advancement of the respective capital markets.
With the MoU, Strate and MKK intend to build, nurture and develop a co-operative relationship that is
mutually beneficial for their stakeholders.
VPS, the Norwegian Central Securities Depository (CSD), has joined the Liquidity Alliance alongside other CSDs and financial market infrastructures that are using Clearstream’s global collateral management solution, known as the Global Liquidity Hub.
This association of industry peers aims to create a sustainable, cross-market industry approach to address current and upcoming regulatory and operational requirements in the collateral and liquidity management space.
VPS recently signed a letter of intent with Clearstream for the development of a new collateral management service for its market.
Since launching a tailored solution for Brazilian CSD Cetip for its market in July 2011, Clearstream has also custom-made and integrated its solution into the systems of other CSDs internationally, such as in Australia and Spain, as well as in South Africa through Strate. CSDs from Singapore and Canada also recently signed letters of intent with Clearstream.
We are excited to let you know that Strate’s new website is now live.
Pages have been updated with the latest information about Strate’s products and services, as well as resourceful information to help the market understand the basics of the CSD industry. Visitors will be able to also view information relating to our Regulatory Environment, given that Strate is a self-regulatory entity, watch videos on our CSI initiatives, read news and access a calendar of upcoming events.
To visit the new site, go to www.strate.co.za.
Strate’s Collateral Management Services is being made available to financial institutions, after successfully integrating Clearstream’s collateral management technology into its system during November 2013.
According to Strate’s Strategic Projects Director, Anthony van Eden, the objectives of a centralised collateral management service aligns to the views and recommendations of global regulators, who have been pushing towards greater risk management and transparency in the market following the global financial crisis.
America, Europe and South Africa have introduced, or are in the process of incorporating, new capital requirement rules under Basel III for banks and Solvency Assessment Management for insurance companies.
Basel III will also impose higher liquidity and capital requirements for banks, which coupled with the G-20 recommendations and the Financial Markets Act’s margin requirements to move to central clearing of standardised over-the-counter derivatives, is expected to place greater pressure on the financial market to manage their high-quality collateral more effectively.
Furthermore, as clients become more concerned about the fungible nature of cash that is placed as collateral, there is a drive to pledge non-cash assets like securities rather than cash. This provides greater protection in the event of financial failure of their counterparty – particularly where collateral has been re-used. With the expected scarcity of high-quality liquid assets to place as collateral due to the regulatory changes, re-use of collateral will become even more important going forward.
Currently, institutions run collateral on a bilateral basis. This means that although there may be very efficient systems in place to manage bilateral relationships, there is not a centralised market view of collateral. In addition, each bilateral relationship may have differing operational and technical standards and requirements.
The end result is that collateral mobility is affected and that collateral is not optimised across the market.
“The move to combine high-quality securities, such as government bonds and Top 40 equities, with cash as collateral will place pressure on the administration of non-cash collateral and the holistic management thereof,” explains van Eden.
Strate has introduced its white-labelled service from Clearstream, a subsidiary of the Deutsche Börse Group, which allows it to provide a proven collateral management service for South Africa. As the South African Central Securities Depository (CSD) for dematerialised bonds, equities and money market securities, Strate is perfectly positioned as an independent trusted third party to provide these collateral services to the financial markets, as a CSD doesn’t face market or principal risk, unlike the other tri-party collateral providers internationally.
Strate’s foray into these services also represent the first market-wide centralised collateral management service for the South African market. The Strate collateral management service is able to integrate with existing bilateral systems in order to best optimise collateral across the market and provide the necessary standardisation in order to maximise collateral mobility in the market.
A dedicated service team at Strate will facilitate all collateral service needs of clients while at the same time providing world-class automation of all non-cash and cash collateral requirements. A key feature is that once bilateral eligibility criteria are confirmed and exposures are submitted to Strate, the resultant selection and allocation of either pledged or ceded collateral is totally automated without any further client intervention.
Furthermore, this collateral is subject to automatic intra-day valuation, collateral top-up and reduction (where required). To touch on some of the technical issues, the benefits include the automated substitution in line with eligibility criteria (where collateral has been sold or needs to be replaced for corporate actions/capital events), market-wide optimisation with full tracking of all collateral placed, received and re-used.
The service will also manage concentration risk across issuers, asset classes, and sectors within asset classes, duration of fixed income securities and on an individual security level. Unauthorised re-use and sale of collateral placed is prevented by the system, while authorised re-use is tracked.
To find out more about Strate’s Collateral Management Services, view the collateral management page on Strate’s website by clicking here.
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