[Iain Scott] Gold mining company Harmony`s shares are to be the first to be transferred to an electronically-based record when the pilot phase of the JSE`s electronic settlement system begins operating at the end of the month.
Another company will slot into the Strate (Share Transactions Totally Electronic) system before the end of October. Other listed counters will be added after a testing period.
"The proving and testing period will assist all parties involved in Strate to come to terms with the inevitable teething problems and the Y2K bogey," the organisation says.
Strate director Bobby Johnston says the first two companies to be transferred from a paper-based system to the electronic system were chosen according to various criteria, including the fact that the share`s trading history needed to reflect volumes of about 200 settlements a day, equivalent to 75 trades a day.
Different types of investors also needed to be involved and the shares had to trade every day with a wide broker participation.
The implementation of this phase of Strate`s development was originally scheduled for 30 July, but was delayed because of the issue of liability for tainted scrip. That issue has now been addressed with the establishment of a fund to protect against tainted scrip.
Johnston says he hopes to have the last company electronic by February or March 2001.
For most investors, he adds, the introduction of the electronic settlement system will be seamless.
Investors with managed accounts will not notice the difference as their shares will still be held by their brokers. " They don`t hold their own shares under the present manual system. Under Strate, they will get their monthly payments in the same way as before.
"Brokers` cash clients will be affected, as their shares would have to be dematerialised prior to sale. But cash clients are seldom in and out of the market on a regular basis, so the impact on them will be limited," Johnston says.
Harmony CEO Bernard Swanepoel says he is delighted his company has been chosen as the first to be transferred and was encouraged to help begin the initiative by the consensus on how to deal with tainted scrip.
"We, as I am sure do other JSE-listed companies, welcome the establishment of a special fund to compensate shareholders who might have been disadvantaged as a result of having been issued with tainted scrip," he adds.
Johnston says the phased introduction means that "we are not yet throwing large volumes of turnover and dematerialisations at the system. We`re going at it in a very orderly and controlled way, so that we can handle any potential failures manually."
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