Settlement services - South Africa

19.11.2018

Definitions

An on-market trade is executed on the stock exchanges and subject to the rules of the exchange.

An off-market trade is not concluded through the stock exchanges and is reported by the seller and purchaser of the securities to the relevant CSD participant for settlement through the CSD.

The processing of these two types of trade may differ as mentioned in this guide and in the Market Profile - South Africa.

Pre-matching service

The table below summarises CBL’s pre-matching service for external settlement instructions, as well as the pre-matching method and start time in the market. For details of CBL’s pre-matching services, see Pre-matching services for external settlement instructions.

Service offeredMethod employedStart (local time)
Debt securities
Immediate Release Flag availableManual via telephoneSD-3
Equities
Immediate Release Flag availableAutomated through StrateSD-2
Connectivity mediumInstruction format a
CreationOnline and Xact Web PortalTick to enable the "Immediate Release" option.
Xact via SWIFT and Xact File TransferField :22F::STCO/CEDE/IREL

a. Not applicable for non-dematerialised securities.

Procedures for domestic counterparties

Procedure for the domestic counterparty

Deadline

Debt securities

Domestic counterparties should:

Market deadline

-

Specify, in their instruction to Strate, the BIC of CBL's subcustodian (SCBLZAJ2XXX);

-

Always indicate CBL's account number at SCB (ZA0000323394) in favour of the CBL customer's 5-digit account.

Equities - Dematerialised (eligible in Strate):

Domestic counterparties should:

Market deadline

-

Indicate no change in beneficial ownership if applicable;

-

Specify, in their instruction to Strate, the BIC of CBL's subcustodian (SCBLZAJ2XXX);

-

Always indicate CBL's account number at SCB (ZA0000323394) in favour of the CBL customer's 5-digit account.

Example:

:22F::BENE//NBEN or omit (default is change in beneficial ownership)

:95P::DEAG//SCBLZAJ2XXX or :95P::REAG//SCBLZAJ2XXX

:97A::SAFE//ZA0000323394

:95P::SELL//CEDELULL or /:95P::BUYR//CEDELULL

:97A::SAFE//xxxxx (CBL customer's 5-digit account)

Equities - Non-dematerialised (not eligible in Strate):

Customers and counterparties making physical deposits in favour of a CBL account should:

No specific market deadline is applicable on non-dematerialised securities.

-

Ensure that the securities are of "good delivery", that is, that they are in a form that is tradeable in South Africa. If they are not, the delivering party should take the necessary actions to exchange the securities before sending them to SCB.

-

Send the physical securities for credit to CBL's account at SCB (ZA0000323394) in favour of the CBL customer's 5-digit account.

-

Send, separately, a duly completed CM42 transfer form. If no CM42 is received within the three weeks following the physical deposit, SCB will return the securities to the delivering party.

Note: The receiving CBL customer should issue a receive free instruction mentioning "physical deposit" in the optional wording.

Allowed countervalue difference

On transactions not settled through Strate, a maximum difference in countervalue of ZAR 50 is allowed for the matching and settlement of against payment transactions in ZAR with domestic counterparties. On transactions settled through Strate, the maximum difference allowed is ZAR 10 .

In the event of a discrepancy, the cash amount of the delivering party will prevail.

Specific settlement rules / settlement restrictions

Settlement restrictions

Against payment transactions in all eligible South African securities with domestic counterparties can be effected in ZAR only.

Account transfers

For account transfers, customers who want to process transfers between their own accounts, either internally or externally, on the South African market should instruct as follows.

Account transfers will be permitted provided that they are free of payment and there is no change in beneficial ownership.

Xact via SWIFT and Xact File TransferXact Web PortalCreationOnline

Settlement Transaction type:

:22F::SETR//OWNI or OWNE

Sec. transaction type:

OWNE - External account transfer

or

OWNI - Internal account transfer

Settlement Processing Narrative:

Internal Account Transfer or External Account Transfer

:22F::BENE//NBEN

Beneficial ownership:

No

Beneficial Ownership Indicator:

No change of beneficial owner

:22F::STAM/STRA/USTNStamp duty tax basis

Stamp Duty Status:

ZA Exempt

Note: Beneficial ownership and stamp duty details are not required for debt securities trades.

Securities lending in the domestic market

Customers entering into securities lending trades in South Africa are required to ensure that the following fields are instructed as follows:

Xact via SWIFT and Xact File TransferXact Web PortalCreationOnline

Settlement Transaction type:

:22F::SETR//SECL or SECB or COLI or COLO

Sec. transaction type:

SECL - Securities lending; or

SECB - Securities borrowing; or

COLI - Collateral In - Held by Collateral Taker; or

COLO - Collateral Out - Held by Collateral Giver

Type of Settlement Transaction:

Securities Lending; or

Securities Borrowing; or

Collateral In; or

Collateral Out

:22F::BENE//NBEN

Beneficial Ownership:

No

Beneficial Ownership Indicator:

No change of beneficial owner

:22F::STAM/STRA/USTNStamp duty tax basis

Stamp Duty Status:

ZA Exempt

Note: Beneficial ownership and stamp duty details are not required for debt securities trades.

Off-Market Repo

The following fields must be completed for Off-Market Repo:

Xact via SWIFT and Xact File TransferXact Web PortalCreationOnline

Settlement Transaction type:

:22F::SETR//REPU

Sec. transaction type:

REPU - Repo

Type of Settlement Transaction:

Repo

:22F::BENE//NBEN

Beneficial Ownership:

No

Beneficial Ownership Indicator:

No change of beneficial owner

:22F::STAM/STRA/USTNStamp duty tax basis

Stamp Duty Status:

ZA Exempt

Note: Beneficial ownership and stamp duty details are not required for debt securities trades.

Portfolio transfers

Portfolio moves are defined are free of payment transfers, resulting in no change in beneficial ownership, due to a transfer of portfolio between two local custodians (CSDPs). The following fields must be completed for portfolio transfers:

Xact via SWIFT and Xact File TransferXact Web PortalCreationOnline
:70E::SPRO//Portfolio Transfer

Settlement instruction processing additional details:

Portfolio Transfer

Settlement Processing Narrative:

Portfolio Transfer

:22F::BENE//NBEN

Beneficial ownership:

No

Beneficial Ownership Indicator:

No change of beneficial owner

:22F::STAM/STRA/USTNStamp duty tax basis

Stamp Duty Status:

ZA Exempt

Note: Beneficial ownership and stamp duty details are not required for debt securities trades.

Rolling of off-market trades

In the event that CBL receives an off-market instruction after the cutoff for reporting orders to the CSD, or the orders do not match by the cutoff, CBL will facilitate the settlement process by reporting the off-market instruction to the CSD for the next available settlement date.

This facilitation process may continue for a maximum of five business days, for equities and for bonds, after the requested settlement date of the original instruction.

Instructions for bonds or equities that fail to settle after T+10 will be cancelled and purged from the system. Customers who want to settle the instructions will be required to input a new instruction with the same trade date as the original instruction but a new value date agreed with the counterparty. In such cases, the trade will attract a penalty of ZAR 1,000 for each day counted after T+10.

Such penalties can be waived for trades that fall outside the normal bonds settlement cycle (for example, Repo, Reverse Repo, Sell Buy Back and Buy Sell Back). To enable the onward application to the Regulator for such a waiver, customers are requested to specify the eligible trade type in the Type of Settlement Transaction field of their settlement instructions.

Rolling of on-market equities trades

The rolling of on-market trades is managed by the stock exchange. Transactions may only be rolled twice. Each rolling of settlement will default to a T+3 settlement cycle where the original trade date will be maintained. Failure to secure commitment for the transactions to settle on the second rolling will require the relevant Settlement Authority to invoke either the Retransactions or Compensation procedures. Margin will be held until the future rolling of settlement has settled.

If CBL is notified of a rolling of an on-market trade, the customer will receive a cancellation advice and respective allegement notification with the original trade date and a new settlement date as determined by the stock exchange. The customer will need to input a new instruction with original trade date and settlement date as determined by the stock exchange.

Late instructions for debt instruments

Specifically for bond instructions, CBL will contact the customer if a late instruction is received and settlement is still possible for the stated settlement date. In such cases, the customer has the following options:

  1. Proceed with the settlement of the late instruction whereby the customer will assume the liability for the fine/transgression of ZAR 5,000 per transaction imposed by Strate.
  2. Roll the transaction to the next possible settlement date.

If choosing the first option, the customer must send a MT599 to CBL by 10:30 CET stating to proceed with the late settlement and accept the Strate fine. Should CBL receive any MT599 between 10:30 CET and 12:00 CET, the request shall be handled on a “best efforts” basis with its subcustodian. In the event that no instruction is received or the request is not successful, the trade will automatically roll to the next possible settlement date.

Penalties

Penalties in Strate for debt securities

For any penalty related to late instruction or late reporting, CBL will pass the charge directly on to the appropriate customer. To avoid these penalties, customers must send their settlement instructions before the instruction deadline.

CBL has been granted permission by Strate that off-market bond securities transactions may conform to a same day settlement cycle and that these transactions must be reported on SD by 12:00 and committed by 13:00 (South Africa time), in order for the late reporting/committing fines to be waived. 

Same day settlement means a T+3, T+2, T+1, T+n transaction reported to Strate on the same day on which settlement occurs.

Penalties in Strate for equities

For any penalty related to off-market equity trades settled through Strate, CBL will pass the charge directly on to the appropriate customer. To avoid these penalties, customers must send their settlement instructions to CBL, as follows:

Same day

  • To avoid penalties, booking of off-market same day orders must reach CBL on time as late orders will attract a penalty of ZAR 5,000.00 per transaction leg reported to the CSD after the market deadline. Same day orders in respect of account transfers, portfolio moves, and securities lending transactions should always state that there is no change in beneficial ownership in order to conform to market practice.
  • Unauthorised account transfers, lending account transfers and portfolio moves on Record Date are prohibited and will incur a penalty of ZAR 10,000.00 per transaction leg.

Late reporting of off-market orders

Any off-market order booked after the market deadline will incur a penalty of ZAR 1,000.00 per transaction leg.

Late committing of off-market orders

Any off-market order committed after the market deadline will incur a penalty of ZAR 1,000.00 per transaction leg.

For further details on the above and other Strate penalties, please refer to the Penalties section of the Market Profile (South Africa).

Duty on transactions

South African equities are, in principle, subject to South African Securities Transfer Tax (STT) unless an exemption applies. STT is payable upon purchase of South African listed and unlisted equities with a change of beneficial owner.

STT is payable, by the buyer. It is calculated on the market value of the securities at a rate of 0.25% and is imposed on registration, following a change in beneficial ownership.

CBL will levy STT on external receipts of equities where no exemption is claimed.

Impact of STT on instruction formats

External receipt instructions for settlement must indicate the tax status of the transaction with regard to the STT payable on listed and unlisted equities. This is mandatory and a matching criterion (that is, trades will not match unless both buyer and seller provide identical STT status information).

It is most important that both parties to the trade are aware of this requirement and agree at the outset on the appropriate tax status of the transaction.

The following table shows the instruction details to be considered by customers in relation to STT:

StatusRequired inputRemarks
CreationOnline
STT payableNone
STT not payableBeneficial Ownership Indicator:
“No change of beneficial owner”

Stamp Duty Status: “ZA exempt”
No change in beneficial ownership


Exempt from STT
Xact via SWIFT and Xact File Transfer
STT payableNone
STT not payable:22F::BENE//NBEN

:22F::STAM/STRA/USTN
No change in beneficial ownership

Exempt from STT

Payment of duty

For external receipts of South African equities, the customer’s ZAR account will be debited with STT as soon as the duty has been paid to the South African tax authorities, that is, during the month following the month in which the transaction took place.

If the South African tax authorities question or make inquiries in relation to any details of the customer’s transactions, including the eligibility for exemption, it is the responsibility of the customer to provide CBL with all required explanations and/or documentation.

By sending CBL an external receipt instruction for securities subject to South African duty, the customer is deemed to indemnify CBL for any taxes, penalties, interest thereon and other costs that CBL may incur as a result of CBL’s reliance on the information included in the customer’s instruction, including the claim to be entitled to exemption from the duty.

Partial settlement

Partial settlement is not applicable in the Strate settlement environment and customers that require that a transaction settle no later than the agreed settlement date must inform their counterparty that all relevant securities due to be delivered to CBL are to be delivered by settlement date.

Back-to-back processing

Back-to-back processing is available for transactions in all dematerialised securities eligible in this market. If both the customer and the domestic counterparty meet their settlement obligations and fulfil the market's back-to-back requirements within the relevant deadlines, the linked receipt and the linked delivery will settle with same-day value. To benefit from this functionality, customers must ensure that their back-to-back instructions contain details in the correct format for the connectivity medium used, as follows:

Connectivity mediumPool ID formatField(s) to be used
CreationOnline16x a
and
Turnaround
Pool Reference

Type of Settlement Transaction
Xact via SWIFT and Xact File Transfer:POOL//16x a
and
:SETR//TURN
Field :20C: sequence A1

Field :22F: sequence E

a. The reference (16x) must neither start nor end with a single slash ’/’ nor must it contain two consecutive slashes ’//’.

Note: Where back-to-back instructions are received late, Strate penalties are charged and reported to the CBL customer for each leg (see Penalties above).

Management of failed instructions

Domestic instructions remain in suspense until they settle or until they are cancelled. CBL reserves the right to cancel an instruction with a domestic counterparty that has not settled by the fifth domestic business day after the day on which the instruction was released to the depository for settlement.

New issues settlement

Customers should advise the domestic issuing agent to deliver the securities to SCB on the day on which the new issue is distributed.

Customers must instruct CBL with a receipt free instruction. For confirmation times, please refer to Settlement times.