CFCL Settlement – South Africa

Settlement process

Please refer to the Settlement process - South Africa for the complete information about the Settlement process.

Settlement services

Pre-matching service

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

Procedures for domestic counterparties

Allowed countervalue difference

A maximum difference in countervalue of ZAR 350 is allowed for the matching and settlement of against payment transactions with domestic counterparties. In the case of a discrepancy, the seller’s amount 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, clients 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.

Off-Market Repo

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

Portfolio transfers

Portfolio moves are defined as free of payment transfers, resulting in no change in beneficial ownership, due to a transfer of portfolio between two local custodians (CSDPs) or within the same custodian where the client uses another ICSD or global custodian. The following fields must be completed for portfolio transfers:

Rolling of off-market trades

In the event that CFCL receives an off-market instruction after the cutoff for reporting orders to the CSD, or the orders do not match by the cutoff, CFCL 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, after the requested settlement date of the original instruction.

Instructions for equities that fail to settle after T+10 will be cancelled and purged from the system. Clients 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 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 CFCL is notified of a rolling of an on-market trade, the client 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 client will need to input a new instruction with original trade date and settlement date as determined by the stock exchange.

Penalties

Penalties in Strate for equities

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

Same day

To avoid penalties, booking of off-market same day orders must reach FCBL 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 and portfolio moves should always state that there is no change in beneficial ownership in order to conform to market practice.

Unauthorized 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.

CFCL 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 clients in relation to STT:

Payment of duty

For external receipts of South African equities, the client’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 client’s transactions, including the eligibility for exemption, it is the responsibility of the customer to provide CFCL with all required explanations and/or documentation.

By sending CFCL an external receipt instruction for securities subject to South African duty, the client is deemed to indemnify CFCL for any taxes, penalties, interest thereon and other costs that CFCL may incur as a result of CFCL’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 clients 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 CFCL 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 client 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, clients must ensure that their back-to-back instructions are formatted as described below:

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 CFCL customer for each leg (see Penalties above).

Management of failed instructions

Domestic instructions remain in suspense until they settle or until they are cancelled. CFCL 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

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

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