Activity on SA's electronic trading system has surpassed expectations since going live towards the end of last month.
Strate developed the Money Market Securities System, in conjunction with the market, which allows securities trade to be processed electronically by banks and other financial institutions. Strate handles the settlement of a number of securities, including equities and bonds for the JSE, as well as a range of derivatives.
COO Anthony van Eden says, since launch on 23 February, the electronic settlement system has beaten expectations. Between when it went live and 3 March, R51.9 billion in trade passed through the system.
The JSE dematerialised shares some time ago, transforming the stock market from a paper-based system, in which ownership was listed on a physical document, to an electronic system.
Now, the latest step has been completed and sees about R500 billion worth of money market securities in issue moving onto an electronic platform. “Money market instruments issued in paper will run the course of their tenure and settle in the paper environment. All new issues from the live date will be issued and settled electronically,” says Van Eden. This mitigates the risks that were associated with the informal, over-the counter financial market.
Van Eden adds that the benefit of the electronic system, compared with the previous paper form of trading, is that it mitigates operating and settlement risk.
He explains that, when securities were issued in paper form, they were normally issued in “bearer form, which meant that the person holding the certificates held title unless someone proved otherwise. In addition, says Van Eden, there are now no risks that the securities can be lost, stolen or counterfeited.
Money market securities or shares are now issued in the name of the beneficial owner, and the ownership and transfer of ownership is recorded in a central securities register at Strate, says Van Eden. For the first time, issuers of money market securities will have real-time records of the owners of its shares.
Van Eden says Strate has addressed all possible points of failure in the system, and put a disaster recovery system into place. He explains that trades are still concluded telephonically, but the details to settle the trade are reported and settled on a real-time basis through the South African Reserve Bank.
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