Strate, the JSE`s central depository company, is set for explosive growth as it has made merger overtures to the bond settlement company Unexcor and is looking to take over the futures settlements for the SA Futures Exchange.
If the deals materialise, Strate will become the only settlement organisation in SA, as it will handle scripts for the JSE, settlements for the bond and futures markets, and the money market contracts between the banks.
Strate CEO Monica Singer says no definite numbers could be placed on any merger with Unexcor as the corporate finance studies are still under way.
"Furthermore, we have to await the Bond Exchange`s decision on Strate handling their settlements. This decision should be finalised by 22 August."
Market observers say the merger of Strate and Unexcor would make sense as there are overlapping shareholders. Strate is 50%-owned by the JSE and the balance is split between banking groups Nedcor, Standard Bank, Absa and FirstRand. These are the same banks that own Unexcor.
Unexcor handles the settlement process for the Bond Exchange of SA, which has resisted attempts by the JSE to merge. In July 2001 the JSE bought the SA Futures Exchange (Safex) and made it a JSE division. Safex handles its own settlements.
"Should the Bond Exchange approve Strate handling their settlement process, then we can expect a merger with Unexcor by the end of August," Singer says.
The possible merger should help Strate meet its performance objectives. Singer says the current Strate budget will see revenue exceed expenses in 2003 and the first shareholder dividend will be paid out in 2009.
According to Singer, this is in line with international trends. Recently Belgium, Holland and Luxembourg combined their central depositories to form Euroclear - essentially a pan-national settlement organisation.
Strate`s (Share Transactions Totally Electronic) formation was initially turbulent as it had to cope with the needs of the JSE and its brokers, while balancing these with the banks` demands. Singer says before being appointed as CEO in 1999, she had to continuously poll the banks for consensus.
"JSE CEO Russell Loubser helped protect me from the various situations by streamlining the management chain so that now I only have to report to one boss," she notes.
Strate was set up in order to dematerialise JSE script so that share certificates would be held in a central depository in electronic format. The main advantage was that it would eliminate the risk associated with fraudulent or forged share certificates. The system is licensed from a Swiss group and Indian software group Tata did the configuration.
"The beauty of our system is that we can settle anything," Singer says.
Singer is one of five finalists nominated for Nedbank`s Business Woman of the Year. The winner will be announced on 1 August.
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