South African Financial Blockchain Consortium wins global accolade

The 24 financial market players who form part of the SA financial blockchain consortium (SAFBC) have been recognised for their blockchain research efforts in the Banker Technology Projects of the Year Awards 2017. The Banker is owned by the Financial Times and is one of the world’s premier banking and finance resources, read in over 180 countries.

 

Formed in 2016, the consortium aims to redefine the South African financial system based on blockchain technology, which has tremendous promise to improve transaction speeds and reduce costs that will help address financial exclusion issues. Members of the Fractal Solutions team at Strate Chair the IT Stream of the SAFBC and are the Secretariat as well for the consortium.

 

Members of the SAFBC are: ABSA, AlexanderForbes, BankservAfrica, Bowmans, Capitec, Curo Fund Services, Citadel Wealth Management, Finswitch, FirstRand, FNB, Ince, Investec, JSE, Nedbank, PASA, Rand Merchant Bank, Sanlam, Silica, Standard Bank, Standard Chartered, Strate, ZAR X, FSB (observer), SARB (observer).

 

According to the magazine, SAFBC is exploring different technologies, including Ethereum, Chain, Hyperledger and Corda. “The consortium is attempting to show how this technology is a paradigm shifter. The historic assumptions that were taken for granted, such as digital money intimately tied with credit risk against the institution holding the money, as well as the entire concept of fractional-reserve banking, are being questioned, and this questioning is allowing a whole host of possibilities to emerge, pointing to a much better financial system that better serves the needs of customers and clients of the industry, according to SAFBC,” it reads.

 

The SAFBC acknowledges its collaboration between members as the key recipe for its success.

 

 

 

Strate Collateral Management Services (SCMS): An automated, compliant Tri-Party Collateral solution that completely meets the market’s collateral needs

Regulation for cleared and non-cleared derivatives has driven the themes of collateral transparency, segregation, collateral tracking , standard reporting requirements and eligibility. Upcoming regulation, such as Secured Funding Transaction Reporting (SFTR), is further driving these themes at a transactional level for securities lending and borrowing, margin lending, commodities lending and borrowing and repurchase transactions. It is clear that the administrative burden on secured funding transactions is only going to increase in the foreseeable future, especially as collateralisation takes place on a per security basis.  It is therefore critical to have certainty that each transaction undertaken, whether on a pledge or cession basis, fully complies with local market regulations in an efficient manner.

 

Strate offers a Tri-Party collateral product called Strate Collateral Management Services (SCMS), which is offered in addition to the traditional pledge and cession options. SCMS fully automates collateralisation processes between collateral givers and receivers, as well as the underlying post-trade ‘plumbing’, to ensure that transactions are effected efficiently and in compliance with local regulations, while futureproofing against upcoming regulations. This functionality fully alleviates the administrative burden typically associated with both pledge and cession transactions. This is achieved by Strate’s direct integration to the CSD Participants of collateral givers and receivers, and the use of segregated depository accounts.  The solution is abstracted above the settlements layer and is able to manage complex collateral rules and then automatically execute the most optimal collateral by instructing custodians in an efficient, compliant and accurate manner.

 

Typically, pledging at a securities level has been a significant administrative burden. However, with SCMS, pledges are perfected at a securities level in terms of Section 39(1) of the Financial Markets Act via an automated system in just a few minutes, with no manual intervention or administration required from users. This enables highly efficient intra-day collateral substitutions on an unlimited basis.  SCMS further extends this automation by allowing collateral givers to trade out of a single account, while at the same time enabling both cession and pledge of securities at an ISIN level – as corporate events, pending sales and reserved securities are already factored into the solution’s algorithm. Collateral optimisation is thus enabled for collateral givers, as they will not be required to manage collateral between separate collateral accounts  and keep ‘buffer’ collateral in order to meet needs of multiple collateral receivers.

 

The SCMS solution is already live in the South African market and has enabled the automated use of both pledge and cession constructs across multiple exposure types  and categories of financial and non-financial institutions.

 

If you are interested in learning more about our Tri-Party Collateral Services, please contact collateral@strate.co.zaor Steve Everett on +27 11 7595496.

 

CloudMargin and South Africa’s First Tri-Party Collateral Agent – Strate Collateral Management – Bring Unprecedented Automation, Efficiencies to South African OTC Derivatives Participants

South African market participants can now enjoy unprecedented automation and straight-through processing by leveraging newly available, integrated cloud-based technology to exchange tri-party SWIFT1 messaging for collateral instructions, settlement and confirmations. CloudMargin, the multi-award winning creator of the world’s first web-based collateral and margin management solution, and Strate, the South African Central Securities Depository (CSD) and South Africa’s first Tri-Party Collateral Management Agent, today announced that they have just integrated their platforms. The move makes tri-party messaging and collateral optimisation more accessible for both buy- and sell-side participants in the country.

 

The agreement enables clients to efficiently and seamlessly use their collateral held at Strate to cover their margin calls in the over-the-counter (OTC) derivatives market. For local market participants without their own SWIFT membership, this previously would have been a time-consuming, manual process to handle messaging related to collateral instructions, confirmations and settlement. Now, they can take advantage of the CloudMargin and Strate Collateral Management Services straight-through processing capability via SWIFT.

 

Due to the fact that the solution is cloud based, collateral management clients can implement it quickly at a reasonable cost, the firms said.

 

Lee McCormack CloudMargin Head of Strategy, said: “We are delighted to roll out this breakthrough service in conjunction with Strate Collateral Management Services to market participants in South Africa, helping them increase their efficiencies via our cloud-based platform. We are continuing to build an inter-connected network of organisations globally that give clients one-stop access to a broad range of collateral management and other related services for cleared and uncleared derivatives transactions.”

 

Steve Everett, General Manager of Strate Collateral Management Services, said: “We are delighted to partner with CloudMargin to provide a fully integrated, cost-effective and powerful collateral management capability to the South African market. This comes at a time when firms here are preparing to meet the requirements of the non-cleared OTC derivatives margin regulation due to take effect on Sept. 1, which will require enhanced collateral management capability from both the buy-side and the sell-side.”

 

 

 

Truly making a difference through design thinking

Did you know that 35 days is the average that a new technology takes to attract 50 million users in Silicon Valley? In a world where it takes a little over a month to attract and retain customers, companies have never been more serious about putting the customers first through strategies that resonate with their emotions.

 

While meeting customer’s needs has been one of the cornerstones of any business strategy, business leaders will soon, if they have not already, realise that strategies have evolved to be customer centric across all pillars – by understanding how the client engages with the business from the pre-sale to the post-sale interaction, how the business makes the customer feel, and how the full experience can be improved across each potential interaction point.

 

According to Strate CEO, Monica Singer, it’s about under promising and over delivering using technology to improve what customers may experience. “Technology allows people to feel connected, so the use of advanced technologies, such as big data, distributed ledger technology, the Internet of Things and machine learning, are playing a huge role in how we make our customers feel, which underpins the success of the business.”

 

Singer adds that with the rise of a tech-savvy generation of clients, businesses need to embrace being innovative through design thinking and technological advancement to remain relevant and be competitive in today’s dynamic environment, or risk becoming obsolete.

 

Strate, as a Central Securities Depository serving South Africa, has existed since the 1990s and incorporated innovation into its business model from the beginning. By understanding global best practice, engaging stakeholders to regularly assess market dynamics and needs and keeping abreast of the latest technological advancements, it introduced many market changing solutions that add value to clients. One such example is a collateral management solution that would help bolster liquidity in the face of regulations, such as Basel III, that would threaten the balance sheet of many banks. However, Singer says that while the business brought this innovative solution to the market, it had to up the ante, which is one of the reasons the company’s collateral solutions can look at cross border collateral transfer using Distributed Ledger Technology, or that soon, it will also be offered using Cloud Computing.

 

“We have the alpha generation of customers who have been born after 2010 in a technological world. Everything they learn is from technology. Children are likely to learn things now from YouTube before they do from their teachers. Over the next two decades, businesses can’t be asking this generation to fill out paperwork, these businesses need to evolve to generate loyalty from the alpha generation and beyond,” she adds.

 

Design thinking is a collaborative process that is human centred. Businesses need to look at the whole pattern in the ecosystem and, through collaboration and the facilitation of social interaction, understand the full customer experience. They then need to combine left- and right-brain thinking when approaching their strategies to be analytical and intuitive when defining the emotional needs of customers without being held ransom by the needs of the product or service.

 

“It’s hard to kill your own product, but rather be the one to do it first before others do. If you are not using a design thinking approach, your customers may just kill the product as they did with Kodak, a giant which no longer exists thanks to innovation with mobile technology,” explains Singer. She elaborates that businesses need to spend three quarters of their time holistically looking at the whole ecosystem to understand it, then focus the rest of the time on product development. “Once businesses understand the ecosystem, they should create ideas without limitations and prototype those ideas with the market to get feedback, then improve on those ideas by combining customers’ needs with their aspirations.”

 

While evolution is key to keep up with the unprecedented rate of change, some businesses need to acknowledge that they need an ambidextrous strategy with leadership that too, can apply ambidextrous thinking. “Yes, companies need to establish themselves to be relevant in the future, but there are many cases where they need to nurture the core that currently serves the market. This happened with the media a number of years ago when digital news and Twitter threatened to be the demise of print media, yet print still exists because there is a market for it that wants to turn the pages of a newspaper or magazine. As the environment gets more competitive, companies need to remain relevant by designing their strategies around the customer; Strategies that continue to build trust by understanding the customer’s point of view, where customer-centric solutions are designed with this in mind.”

 

Similarly, a company like Strate has to nurture and evolve its core, while explore disruptive technologies. During 2016, it created two divisions within the company, CSD Operations and Fractal Solutions to achieve this. While initial thoughts would be that disruptive technologies could, and may even still, threaten the core business of CSDs – there is more of a case that they complement the business model and can drive solutions that address business problems across the ecosystem. One such example is proxy voting for corporate actions, which is admin intensive and flawed. Fractal Solutions has been working closely with the market to develop an e-Voting solution using Distributed Ledger Technology. The CSD is also looking at its big data capabilities to create value-adding solutions that provide further insights to clients.

 

Elsewhere within the business, the company continues to incorporate design thinking to address the needs of clients within the current model. Traditionally, financial markets have existed with one stock exchange and a Central Securities Depository. In South Africa, this is no longer the case after multiple exchanges were awarded licences after the country existed for more than 100 years with a single service provider, which has been a client of Strate’s since the CSDs inception. The new exchanges have also appointed Strate as their CSD, and Strate has had to show its flexibility and innovative thinking to understand their respective business models to create bespoke solutions for each.

 

Singer explains that it still remains a necessity to serve the market loyally and maintain the high-levels of service delivery, but it is also imperative to adopt the most advanced technologies and models that make you a best-of-breed company. “To survive, businesses need to be innovative to keep up with the rate of change of a new breed of customers. To thrive in this new era, businesses must choose to notch it up another gear and adopt design thinking with advanced technologies, without losing sight of the current market’s needs,” she concludes.

CSD Working Group Releases Product Requirements for General Meeting Proxy Voting on Distributed Ledger

CSD Working Group on DLT, an association of Central Securities Depositories working on developing reference products using Distributed Ledger Technology, has released product requirements for the proxy voting business case during the International Securities Services Association (ISSA) Operational Committee meeting in London on April 24, 2017.

 

The document titled “General Meeting Proxy Voting on Distributed Ledger: Product Requirements” contains requirements to all technical aspects of the product:

  1. Functional requirements for the process, described as a minimal viable product aimed at a generic market, and extension functionality that covers specific local needs of the markets in Russia, South Africa, Switzerland, Chile, Nordic and Baltic countries.
  2. Non-functional requirements.
  3. Trust requirements, enabling to provide the value typically associated with DLT-based solutions.
  4. Baseline data entities, roles and their access rights.

 

The document aims to provide a complete description of a reference product for proxy voting – one that can be used by business in most markets worldwide. The priorities of the working group were to capture the business value of using DLT in the field of proxy voting without completely reworking established business practices.

 

Alexander Chekanov, Enterprise Architect at NSD, the leader of the working group, says: “With this effort, we aim to provide clarity to the infrastructure operators and market participants in how to implement DLT-based solutions in their local markets and to create value associated with the technology. Proxy Voting has served as an excellent business case where the advantages are both visible and easy to achieve without causing a major disruption on the market. For NSD in particular, it is one of the many steps that we take to make Russian post-trade infrastructure more open and reliable for both the local market and internationally”.

 

Monica Singer, CEO of Strate, says: “Strate has always maintained that collaboration with key market players and experts leads to the successful implementation of industry-wide projects that add significant value to the markets. Distributed ledger technology has opened the doors to a new world of how people can transact and we’re excited to be an integral part of this journey, where we’re changing history. Together with other working group members, we have embraced this technology to improve the financial markets and are excited at the progress being made on proxy voting using distributed ledger technology”.

 

Javier Jara, Commercial and Legal Affairs Manager at DCV, says: “For the Central Securities Deposit of Chile, it is very important to be part of this project as one of the representatives of Latin America, it implies being in the leadership of projects that use Blockchain technology for Securities Deposits. In particular, this project of Proxy Voting raised the common requirements to all markets, allowing the incorporation of extensions that adapt to other specific markets, so when this project reaches the Chilean market, will already be thought of local needs. We hope to continue working with our colleagues from other Central Securities Depositaries around the world, to increase in the collaboration and support in adaptations and developments in new technologies”.

 

The document has been produced by the working group during the period between October 2016 and April 2017 and involved collaboration between NSD, Strate (South African CSD), SIX Securities Services (European ICSD based in Switzerland), Nasdaq (CSD in Nordic and Baltic region) and DCV (CSD of Chile). The presentation to the ISSA Operational Committee in London on April 24th was the first public reveal of the document.

 

The group is continuing to work on the business case of proxy voting on DLT. Future updates of the document will be focused on:

  • business value distillation for infrastructure operators and market participants,
  • standardization and formal alignment with the existing market practices and ISO20022 standard,
  • extensions for more markets worldwide.

 

The latest version of the document is available online (Click here).

 

The CSD Working Group on DLT welcomes any feedback or collaboration opportunities from potential partners. To get in touch with the working group, please contact one of the member organizations:

 

 

National Settlement Depository, Russia Alexander Chekanov chekanov.as@nsd.ru
Strate, South Africa Tanya Knowles tanyak@strate.co.za
SIX Securities Services, Switzerland Urs Sauer urs.sauer@six-group.com
Nasdaq, Nordic Henri Bergström henri.bergstrom@nasdaq.com
Depósito Central de Valores, Chile Claudio Calderón claudio.calderon@dcv.cl

 

 

 

Finding what it takes to be a conscious company

Strate was named the winner of the Inaugural Conscious Companies Awards held at an evening gala event on 11 May in the northern suburbs of Johannesburg.

 

There has been much to be said about the inclusivity of stakeholders to create and nurture shared value, as opposed to shareholder value, says Strate CEO Monica Singer.  “Companies are typically seen as vessels with limited liability, no heart nor soul. However, to be acknowledged as a company that is recognized for bringing humanity to capitalism is amazing, because it shows that Strate has the heart and soul to make a fundamental difference in its ecosystem,” she says.

 

Given that the world is interoperable, Singer truly believes in Ubuntu and that ‘we are because you are’ and encourages businesses to recognize that they should be consciously making a positive impact to the stakeholders within the communities that they operate in.

 

Conscious companies, by their very definition, operate with a sense of higher purpose and recognise the inherent value of linking business success with the socio-economic upliftment of the rest of society. “Truly conscious companies understand the need to be authentic in what they do and in driving change for the greater good, showing that caring forms part of their DNA in everything that they do,” adds Singer.

 

Her desire to change the world led to the creation of a company that truly cares for and nurtures its employees. A company can create magic by caring for people, because those people will go on to achieve their form of greatness, creating ripples of change across society.

 

Monica Singer, Strate CEO, following the announcement naming Strate the award winner

“Since its inception, Strate has made it our end goal to put the needs of the country first by embracing solutions that simultaneously transform and revolutionise markets and empower South Africans. We started by digitizing securities settlement in the financial market because it was in the best interest of South Africa’s financial markets.”

 

Prior to the birth of Strate, the country was ranked the worst emerging market for operational and settlement risk. Daily trades on the stock exchanged average 4000 in a day. The company has spent the past two decades building on those capabilities for the benefit of all South Africans, and as a result, South Africa is now rated among the top economies globally for financial market development and regulation of its exchanges. Trades average 280 000 on a bad day in today’s market. “Our philosophy has been to sell trust and its purpose has always been to serve the market for the greater good, in everything we do,” she explains.

 

Strate’s success has been underpinned by the spirit of collaboration. “Twenty years ago, we worked together with the financial market to transform the way things worked. Over the years, we have been working with various companies to boost financial literacy. Interestingly, companies like the Maharishi Institute and Thomson Reuters are some of those companies, and they have too been recognized as finalists in the Conscious Companies awards. Going forward, we are working with various parties locally and globally to embrace disruptive technologies and how it will change the lives of people for the better.”

 

75 companies were nominated for the award. Nominees were judged against the criteria listed below, where the company:
• understands what it takes to be authentic
• operates with a higher sense of purpose
• integrates the interest of all stakeholders
• develops visionary leaders
• builds a culture of trust, accountability, governance and caring
• encourages creativity and innovation
• is a responsible citizen in the communities that they operate in

 

Strate put forward its evidence for the criteria, with many examples of collaboration to create shared value. The company put forward its education initiatives across the board, conducive working environment for employees, as well as efforts to uplift the Africa and Middle East region. Further to this was examples of how it reinvests in the financial markets by way of its Special Purpose Reserve Fund, a fund that collects fines for non-compliance with Strate’s Rules and Directives that then pays for market education initiatives – from grass root to the highest degrees in finance at some prestigious South African universities.

 

Prof. Mervyn King, together with Nomahlubi Simamane, Vukani Magubane and Dr. Essop Pahad formed the panel of judges. They selected finalists for the awards in two categories: The NGO/NPO/NPC category as well as Company category.

 

The winners in the NGO/NPO/NPC category were Afrika Tikkun, an organisation which is chaired by Singer. The Maharishi Institute’s Imvula Empowerment Fund was named the runner up.

 

The winner of the Company category was Strate, and Belgotex Floor Coverings was named the runner up.

 

“We would like to commend all companies recognized in the awards and others across the continent that share similar values. It reflects that we walk this journey together to secure a future that will bring prosperity to all,” concludes Singer.

 

 

The future of South Africa’s capital markets: Far from lacklustre

South Africa has one of the most sophisticated financial markets and has earned a reputation for its sound financial market development. Looking to the next five years, A2X Markets CEO and co-founder Kevin Brady believes the market could become more dynamic and efficient as new exchanges are granted licences.

 

A2X Markets was officially granted its licence by the Financial Services Board in April 2017, becoming the country’s fourth licenced South African exchange and Strate’s newest client. During an interview at A2X’s offices in the heart of Sandton, Johannesburg, Brady had an informative discussion with Strate to describe his company’s business model and settlement cycle.

 

He explained that A2X, as an alternative exchange, would bring modern technology and the latest business techniques to an industry that’s been around for hundreds of years. “A2X will target many of the largest companies currently listed on the JSE, to secondary list on A2X. It will then offer brokers material discounts to transact in these shares, while maintaining the high standard of regulation as set by the Financial Market Act,” he says, while describing the exchange’s business model. By way of an example, he explained the secondary listing principal is well established in South Africa and is the same as a dual listing, where a company has a primary listing on the London Stock Exchange, such as Anglo America and BHP Billiton, and a secondary listing on the JSE.

 

A2X’s model fits into the current capital markets structure, including adopting a familiar T+3 post-trade settlement cycle. “With that, we understand how vital it is to have a renowned and reliable settlement infrastructure, which is why we appointed Strate as the Central Securities Depository for A2X. Strate is open for business and it has been very welcoming of new exchanges.”

 

Beverley Furman, the Managing Executive of CSD Operations, a division of Strate, adds, “This is a very exciting time for our financial markets. As an investment destination, South African capital markets are unique in the sense that they operate on developed first-world infrastructure and the market is well regulated.” A testament to the regulation of the country’s stock exchanges is the ranking highlighted in the 2016-2017 World Economic Forum’s Global Competitiveness Index, which has placed South Africa as the third best ranked country globally (among 138 developed and developing nations) for the regulation of securities exchanges.

 

Furman concludes that Strate is proud to be part of this journey and to be recognized as the independent, trusted service provider within the market. “We are delighted to welcome A2X as the newest player to the South African capital markets and as Strate’s newest client.”

 

 

 

Strate has published its 2016 Integrated Report

Strate has published its annual integrated report for the 2016 financial year end.

 

Not only can you learn about Strate’s operating environment and performance highlights, there are a range of infographics and a wealth of information about the history of the company, as well as the current value it creates for its clients, the community and other stakeholders.

 

To view the report online, click here.

 

Strate categorized as a Level 2 Contributor during its 2017 B-BBEE Audit

During the 2017 Broad-Based Black Economic Empowerment (B-BBEE) Audit, which was based upon the 2016 Audited Financial Statements, Strate was categorized as a Level 2 Contributor with an overall recognition level of 156.25%. This is Strate’s best contributor status yet in the company’s history.

 

Strate continues to pride itself on the efforts by staff to drive transformation, while ensuring good corporate governance and citizenship. The company follows an integrated approach which seeks to engage all stakeholders in creating an enabling environment that contributes to the development of the country and the transformation of South Africa’s economy.

 

For a copy of Strate’s latest B-BBEE certificate, click here.

 

Strate uses its robust technology to service multiple markets

Strate, a South African Central Securities Depository (CSD), has shown the robustness of its clearing and settlement technology by offering equities settlement to multiple markets.

 

On 28 February 2017, it welcomed 4 Africa Exchange (4AX), the country’s newest exchange which focuses on listing companies that are currently trading over-the-counter (OTC) shares in Broad-based black economic empowerment (B-BBEE) schemes as well as limited participation schemes.  4AX successfully integrated their exchange into Strate’s clearing and settlement platforms. 4AX offers investors a T+3 settlement cycle, allowing trades matched on its system to be cleared and settled within three business days after the trade date.

 

At the beginning of September 2016, the Financial Services Board notified the market that it had granted 4AX an exchange licence. Strate was appointed by 4AX to provide it with central securities depository services.

 

Beverley Furman, the Managing Executive of CSD Operations, a division of Strate, says, “This is an exciting time for the capital markets. Three years ago, companies that had been trading OTC shares in B-BBEE schemes were instructed by the Registrar to license their over-the-counter platforms as a regulated exchange, or stop such trading activities, or apply for exemptions. Now the country has a dedicated exchange in the form of 4AX that can serve these companies.”

 

“Strate has been built on an 18-year foundation of trust, where we can be relied on by the markets to provide pioneering solutions that cater directly for their needs. The strategic focus has been on the evolution and strengthening of Strate’s core services. As we extend our services to multiple exchanges across multiple markets, it cements this notion, as well as our independence and high levels of operational excellence.”