Supporting financial market stability

World-class standards of
regulation and governance

On 1 April 2018, South Africa’s financial regulatory system underwent fundamental change as two new regulators came into operation – the Prudential Authority (PA), which was established within the South African Reserve Bank and is tasked with supervising the safety and soundness of all financial institutions, and the Financial Sector Conduct Authority (FSCA), which is responsible for market conduct regulation and supervision.

This represented South Africa’s new “Twin Peaks” model of financial sector regulation, which is modelled on internationally established standards.

The model was formed in accordance with the Financial Sector Regulation Act (Act 9 of 2017), which provides for stronger oversight of financial conglomerates and of systemically important financial institutions (SIFIs), which includes Financial Market Infrastructures (FMIs), such as Strate.

Contributing to global financial system stability

The G20 is an international forum for the governments and central bank governors of 19 countries and the European Union. It was formed in 1999 to discuss policy promoting international financial stability. The Financial Stability Board (FSB) was established after the 2009 G20 meeting to monitor and make recommendations about the global financial system.

As a member of both the G20 and Financial Stability Board, South Africa is committed to developing and maintaining:

  1. A stronger regulatory framework – developing appropriate principles for weak areas of the global system of financial regulation.
  2. Effective supervision – strengthening the effectiveness, governance and domestic and international co-ordination of regulators.
  3. Crisis resolution and addressing systemic institutions – ensuring that the costs and impact of a financial institution’s failure (should it occur) are as small as possible, and that such a failure does not affect the broader financial system.
  4. International assessment and peer review – undertaking regular assessments of the regulatory system and benchmarking principles and practices against international norms.

Underpinning effective
securities regulation

In benchmarking principles and practices against international norms, South Africa’s capital market operates according to the principles of the International Organization of Securities Commissions (IOSCO) who established three clear objectives for effective securities regulation globally, which is namely to:

  • Protect investors
  • Ensure markets are fair, efficient and transparent, and
  • Reduce systemic risk

In support of the Financial Stability Board’s initiative to strengthen core financial infrastructures and markets, IOSCO and the Committee on Payments and Market Infrastructures (CPMI) worked together to enhance the co-ordination of standard and policy development and implementation, regarding clearing, settlement and reporting arrangements across financial market infrastructures (FMIs) worldwide. This culminated in the publication of the Principles for Financial Market Infrastructures (the PFMI) in 2012, which provides clear guidance to an organisation such as Strate in operating its business.

Reducing systemic risk

As South Africa’s principal central securities depository recognised locally and internationally as a Financial Market Infrastructure (FMI) Strate is responsible for upholding and furthering South Africa’s regulatory and governance standards.

Accordingly, we are also responsible for upholding the highest ethical standards in serving the financial market.

We reduce systemic risk by ensuring our operations are efficient, transparent and robust. As a self-regulatory organisation we devise, implement and monitor the rules and directives necessary to oversee market participants and ensure market-wide adherence to the rules that govern the areas of operation of an FMI within South Africa’s financial markets.

Protecting investors

Key to our services is a responsibility to safeguard the legal, digital record of securities ownership on behalf of investors.

The South African market trusts us to independently and accurately hold the legal record of securities ownership. By so doing, we safeguard investors’ rights and contribute to South Africa’s standing as a stable, well-regulated and world-class financial market.

Ensuring markets are
fair, efficient and transparent

We ensure that markets are fair, efficient and transparent by operating within a highly regulated environment governing our various services, including as a central securities depository, associated clearing house and a Payment Clearing House System Operator (PCH SO).

We are regulated by the Financial Sector Conduct Authority (FSCA), Prudential Authority and the Oversight Division of the National Payment System at the South African Reserve Bank.

Upholding the highest
standards of governance

To operate effectively as South Africa’s principal central securities depository and a Financial Market Infrastructure, we work within a framework which comprises several committees that guide clear decision-making and ensure Strate’s operations remain robust, thereby, ensuring it can deliver on upholding market stability.

Regulatory and Supervisory Committee report 2020

Click here to view the Regulatory and Supervisory Committee report for approved CSD participants operating in the South African financial market.