All JSE-listed-equities have been migrated to the electronic settlement environment without hiccup, says central securities depository Strate.
The company says it has taken five years of groundwork with banks, listed companies, transfer secretaries, exchange members, the JSE and Strate to achieve this.
"Strate has confounded the sceptics who believed we would not meet our deadline," says Strate CEO Monica Singer, who adds that not only has Strate delivered what it promised, but that it has done so on time and efficiently.
"In spite of the huge complexity of the operation, blanket electronic settlement has been achieved without any hiccups thanks to the work of a dedicated team."
Singer says few appreciate the enormity of the achievement. "SA now has an electronic settlement infrastructure that matches the best the world can offer."
She adds that the South African model ensures contractual guaranteed settlement through the JSE guaranteeing all equity transactions.
Des Davidson, director of clearing and settlement at the JSE, says that for the first time, investors on the JSE can be certain of settlement taking place five days after they trade.
The historical paper-based process ran the risk of lost or fraudulent certificates or late payments causing delays in settlement. "These have been effectively eliminated with all share transactions being processed totally electronically," he says.
All Strate-eligible market trades have settled on time, every time.
By 15 January, 71% of the JSE's market capitalisation, equivalent in value to R988 billion, had been converted into an electronic record in Strate.
Singer says she hopes that the vast bulk of the remaining 29% will be converted in the near future.
From now, investors wishing to sell their shares cannot do so until they are converted from share certificates into electronic records of ownership.
"Now that all listed companies have successfully moved onto Strate, investors who have not yet lodged their certificates with their brokers or CSDPs (Central Securities Depository Participants) should do so without delay. This is partly because they may not sell certificated shares and partly because the protection they enjoy against tainted scrip expires eight months from now."
She says the cover afforded by the Strate Dispossessed Members' Fund (to cover tainted scrip) is essentially an insurance policy that reimburses investors should their share certificates have been fraudulently negotiated. The threat of tainted scrip does not exist under Strate.
Singer adds that the company does not intend to stop at the settlement of equities and has some exciting plans.
"If Strate were to settle all financial instruments, not only would investors benefit from this enhanced system, but it would also lead to significant economies of scale and improved market efficiency."
Having already started the settlement of warrants, Strate has also put in a tender for money market instruments.
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