South Africa: Equities and bond market settlement issues - status update
Further to the implementation of the Debt Instrument Solution (DIS) by the South African CSD on 26 September 2017, Strate has advised that the settlement difficulties experienced between 26 and 29 September 2017 were the consequence of new or changed operational procedures in the following four aspects of settlement processing:
- Back-to-back links (especially enhancing the visibility within these groups and the identification of the first failing transaction);
- Role definition (brokers, CSD participants, Strate and the JSE (as the Settlement Authority)) and the flow of information between these parties;
- The fails process; and
- The use of the same-day window.
In an effort to address the operational challenges that the market had faced during the past week, a DIS stakeholder workshop was held at Strate’s offices on 30 September 2017.
Although it was not possible to resolve all issues at the workshop, a number of actions were agreed upon:
- Strate confirmed that it had already developed new reports to help identify problematic trades (that is, those that are not yet in a position to settle). These were used extensively during the processing of settlement on 29 September and will now be sent to CSD participants and the JSE Settlement Authority regularly during the day;
- Strate will facilitate a session between the JSE Settlement Authority and CSD participants to understand why the MT548 messages (that are sent to the JSE to highlight problematic trades) are not working as envisaged;
- The JSE will communicate with its Members to highlight the issues encountered and to assist them in the re-booking of trades;
- One-on-one meetings will take place between Strate and the CSD participants to manage the nuances on back-to-back links;
- A workshop will take place between Strate and the market to create a process for failed trades.
The discussions in the workshop were invaluable and, together with the market, Strate have come closer to a resolution for creating a smoother settlement process going forward. Strate has been providing various parties with extracts from its systems to assist various market players in their reconciliation efforts, which have continued throughout the weekend. It should be noted that Members have not yet rebooked all failed trades from the previous week and the rebooking of trades will continue until such time that all Member trade reconciliations have been completed and all pending settlement instructions settle.
Clearstream Banking S.A. will continue to monitor the situation closely, with the support of our local depository, and will provide further information as it becomes available.
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