The three electronic settlement and depository operations, Strate, UNEXcor and Central Depository, are to merge. The new entity's combined value will be R191 million with Strate worth R156 million and the other two estimated at R35 million.
The main shareholders of Share Transactions Totally Electronic (Strate), the Universal Exchange Corporation (UNEXcor) and The Central Depository Limited (CD) have had extensive discussions regarding the manner in which to achieve the most cost-effective and efficient settlement for all financial instruments, thereby further improving the international competitiveness of SA's financial markets.
A statement released yesterday says the merger would tidy up the current shareholding that has the four main commercial banks, Absa, FirstRand, Standard Bank and Nedcor, each having equal shareholdings in UNEXcor and CD. The same banks also equally hold 12.5% each in Strate while the JSE holds the remainder.
The JSE's Strate shareholding will be diluted to about 40.5% of the new entity once the merger takes place. This is because the deal will entail using Strate as the main vehicle for the new operation and it will buy the businesses of UNEXcor and CD through the issue of its shares to the two companies.
Should the merger receive the required regulatory and board approvals, there will be a standardised settlement system for all of the financial markets.
The statement says the shareholders have agreed that a key element of the merger would be a standardised settlement environment bringing it in line with international best practice and the recently updated G30 (Group of 30 Countries) recommendations.
Strate CEO Monica Singer has been appointed the CEO designate of the integrated entity, and Ray Ayres, CEO of UNEXcor and CD, has been appointed executive director operations designate. They will assume their positions in the integrated entity once the transaction becomes unconditional.
Ayres says the integration process will take place as quickly as possible. "Once all the relevant agreements have taken place, there is no sense in wasting time."
IT challenge
A major challenge will be the integration of the operating platforms. UNEXcor and CD operate with IBM mainframe computers using the MVS operating system, while Strate has a Swiss-developed system called Safire (SA Financial Instruments Real-time Effective Settlement).
"We will have to plan on how to integrate Strate's open architecture system with UNEXcor's, which is essentially a proprietary system," Singer says.
Strate is a combined settlement and depository service for equities traded on the JSE. UNEXcor and CD offer the same services, but separated out into two legal entities exclusively for the Bond Exchange of SA.
Ayres says UNEXcor is examining electronic settlement for money market instruments.
"Our ultimate aim is that our clients will only need one terminal to conduct their transactions - this will be a real cost saving in the long run," Singer says.
The JSE, the Bond Exchange of SA and the Central Securities Depository participants in the Strate process welcome these developments, the statement says.
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