Exchange controls 'curb Strate's potential'

Central securities depository Strate says its technology has more functionality than the local market can absorb, but exchange controls prevent it from becoming a truly global company.

Strate provides clearing, settlement and depository services for electronic financial instruments such as shares.

CEO Monica Singer says part of the company's vision is to become a global central securities depository, but this can happen only when exchange controls are lifted.

"Once overseas companies list here, we will have the technology to transfer the electronic record of holdings into the account of the holder anywhere in the world," she says.

"The only reason there is not remote trading on the JSE is exchange controls." She says if remote trading - where a broker overseas deals in JSE-listed shares - could take place, Strate could settle the trades and transfer the custody holdings to counterparts offshore.

"Technology is not the problem. Exchange controls are the problem," she adds. "We have more functionality than the market can absorb at the moment."

Strate has not given up on its desire to settle trades for other African countries. Singer says all the banks connected to Strate in SA have offices in African states, and Strate is talking to those banks in an attempt to market the idea that it can settle African trades through their offices.

Singer says the local electronic settlement environment compares well with its international counterparts, as shown by the A+ overall market infrastructure risk rating awarded by rating agency Thomas Murray.

An A+ rating classifies the market as "low risk" verging on "very low risk".

"The importance of these exceptionally favourable ratings for our market cannot be overestimated," Singer says. "International investment flows studiously avoid high-risk settlement regimes."

After making losses in the four years to 2002, Strate achieved a R10 million profit last year, which Singer says should go towards improving the next Thomas Murray rating, along with an improvement in the operational arena.