Archive for the 'Regulators' Category

Nigerian Stock Exchange’s new Nasdaq market surveillance

The Nigerian Stock Exchange has gone live with a new market-surveillance platform powered by SMARTS, a solution supplied by Nasdaq.

Tinuade Awe, General Counsel and Head of Regulation, NSE, said in an NSE press release: “As we enter the growth phase of the development of our market, including the introduction of new asset classes such as derivatives, there will be the imperative of processing significant volumes of market information in real-time to detect anomalies. The SMARTS technology, which we have successfully deployed, allows our team to proactively analyze patterns and trends to make sense of the vast amounts of data for investigative purposes and protection of investors, while strengthening the integrity of our market.”

The technology lets the Nigerian bourse proactively monitor market manipulation (including spoofing and layering), detect and deter manipulative tendencies, gather intelligence, carry out monitoring and analysis of traders, conduct multi-asset and cross-market surveillance, and execute risk-based supervision of flagged participants. The new system went live in July.

According to Nasdaq, the SMARTS Surveillance solutions are used at 47 marketplaces, 17 regulators and 140+ market participants across 65 countries and are used by over 3,500 compliance professionals. They have been used for real-time, cross-market, cross-asset surveillance for over 22 years.

Tony Sio, Head of Exchange & Regulator Surveillance, Market Technology at Nasdaq, said: “SMARTS performs universal surveillance of all asset classes and provides a strong platform for NSE to develop new products such as derivatives. We look forward to a long partnership with the NSE as the Nigerian markets evolve.”

CEO Oscar Onyema shows top managers of Nasdaq the NSE trading floor a few years ago. (Credit: businessdayonline)

South Africa’s securities exchange war goes to court

Court is the next battleground in a contest to transform the securities exchange landscape in South Africa. Newly licensed exchange 4AX, which is not yet operational, has launched a High Court application to set aside both the decisions of the FSB regulator and its Appeals Board to give a licence to new exchange ZAR X, according to Moneyweb .

Last September the Registrar of South Africa’s Financial Services Board (FSB) awarded licences to ZARX (Pty) Ltd (ZAR X) and 4 Africa Exchange (Pty) Ltd (4AX) (see our story here). The JSE and 4AX appealed against ZAR X’s licence, but in February 2017 the FSB Appeals Board dismissed the appeal, saying that ZARX and the FSB had complied fully with the Financial Markets Act 2012 (FMA), and awarding full costs to both ZARX and the FSB (see another Moneyweb article). ZAR X settled its first trade in February 2017, delayed from an initial September launch date. Its first listing was agribusiness Senwes. 4AX is not yet trading.

In February Donna Nemer, JSE Director of Capital Markets, said the JSE will fully respect and abide by the decision: “We are still very committed to the market and the participants in this market, and will cooperate fully in the debate on how we should be evolving going forward,” she said. “We will continue the work we are doing with the regulator and all the market participants, including the new exchanges, to maintain the high quality capital markets for which South Africa is really well known.” The JSE is not joining the new court case which 4AX has launched in the South Gauteng High Court to set aside both the decisions of the FSB Registrar and the FSB Appeals Board.

Also in waiting is exchange A2X, which has a licence application with the FSB. For more background on 4AX see our story.

Why another exchange?
The new bourse ZAR X has 3 listed securities and 9 authorized market participants or brokers, according to its website. It says a number of listings are in the pipeline.
According to Geoff Cook, cofounder and director of ZAR X, writing in Business Day newspaper this month: “Nowhere is radical change more desperately needed in SA than in the capital markets. The model that has dominated for more than 60 years is stagnant, with no broadening of the capital markets. It is also hopelessly skewed against the private investor.”
Volumes had grown of trading over the counter (OTC) in shares in black economic empowerment schemes for big companies such as MTN, Vodacom, Multichoice, Sasol and Imperial. Other OTC schemes were being operated as restricted shareholder platforms such as large agricultural cooperatives Senwes, TWK and KWV, while a few other companies sought liquidity at low cost for a limited spread of shareholders.

Geoff Cook, ZAR X Head Markets and Regulations (credit ZAR X)


ZAR X co-founder and CEO Etienne Nel created a platform called Equity Express for the OTC market. In July 2014 the FSB issued Board Notice #68 which effectively compels the OTC equity trading market to alter methodology and operate through a licensed exchange in terms of the FMA.
ZAR X works with a pre-funded model, so that cash is prepaid (deposited into the system before a trade) and a seller’s shareholding is pre-cleared before concluding a transaction. This means a huge reduction in settlement risk. Securities are held in a segregated depository account at a central securities depository (CSD), as required by the FMA, with a CSD participant facilitating clearing. The trade settles on t+0 or real time.
According to Cook: “Only severe disruption will return the financial markets to any sense of reality and social relevance. That disruption has arrived. Brokers can now execute a R1,000 order profitably through a world-leading T+0 prefunded execution model that does not require settlement risk capital, in which trading and administration applications are provided at minimal cost and where live data is free to all. Safe custody fees are zero and fees are only paid on conclusion of a transaction.
“The equity market is too concentrated and the debt market remains inaccessible and opaque. Despite there being nearly 1,300 collective investment schemes as well as many broker-managed discretionary portfolios, allocations are nearly all aligned to a limited number of old economy securities. Passive investment products such as index trackers simply compound the concentration.”
Cook says that regulation and the funding imbalance towards collective investment schemes means innovative small and medium and medium-sized companies will struggle to raise capital from asset managers. They need direct access to retail investors or bespoke asset managers who can invest smaller amounts. Asset managers are restricted by the size of their portfolios to investing in securities with large market capitalization.
He says the new exchange will mean that listings of companies with market capitalization of around R200m will become more common.
Cook claims that on average less than 0.5% of daily market volume on the JSE is retail-driven with less than 300,000 active retail clients, across all brokers, loaded within the JSE’s broker deal accounting (BDA) system. He says 30% of trading volume comes from brokers who collocated or moved their trading systems physically closer to the JSE trading engine in order to profit by millisecond time advantages. According to its website: “No high frequency trading, derivatives or short selling will be allowed. ZAR X has deliberately structured fees in such a manner that we wish to encourage investing rather than trading and, in so doing, promote savings.”
“Nearly all equity listings om the JSE are now done by way of private placement, which requires a minimum investment of R100,000 per subscriber. Offers to the public are rare as brokers in the conventional system cannot facilitate smaller retail client transactions profitably. With high costs and insufficient order flow brokers focus on providing discretionary managed portfolios, which attract higher fees but have higher financial entry requirements.
“The ‘uninvested’ retail investor is therefore totally excluded from directly participating in the capital market. Their only access is indirectly via a collective investment scheme that, if they did, would further perpetuate the shrinking of our capital market.
“The concentration of order flows to fewer institutional brokers is detrimental to efficient and transparent market pricing. With thin net margins, institutional brokers use their balance sheets to secure revenue flow by engaging in principal trading, high-frequency trading (HFT), and facilitation trading, including dark pools.”

Stokvels – South Africa’s $3.8bn savings pool
Cook claims there is huge potential for retail investors to buy securities: “Stokvels, whose members are active savers and investors, have more than 2m members. The Zion Christian Church has about 4-million contributing members. The potential size of the ’uninvested’ retail market is unknown, but I would suggest it is in excess of R700bn. The market system has ignored it.”
ZAR X also hopes to work with other exchanges “particularly in Africa”.
Stokvels are a big part of life in South Africa, with estimated 810,000 stokvels and 11.5m members, with a stokvel economy worth R49bn ($3.8bn), according to the National Stokvel Association of South Africa. There is even a comedy show called Stokvel on DSTV’s Zambezi Magic.

Stokvel comedy, Zambezi Magic DSTV.

Top speakers for BAFM capacity-building seminar 18-19 May


Leaders and movers of African capital markets are heading to Casablanca for the 6th Building African Financial Markets (BAFM) capacity-building seminar on 18-19 May, organized by Casablanca Stock Exchange with the African Securities Exchanges Association and supported by member exchanges.
This year focuses on “Global best practices to enhance African capital markets”. The agenda features CEOs of top African exchanges and other industry leaders: Oscar Onyema CEO of Nigerian Stock Exchange and President of ASEA, Siobhan Cleary of the World Federation of Exchanges, Karim Hajji CEO of Casablanca Stock Exchange, and speakers from Bloomberg, International Finance Corporation, Ethiopian Commodity Exchange, Tanzania Capital Markets and Securities Authority, Securities and Exchange Commission (Nigeria), Safaricom, Kenya Retirement Benefits Authority, Maroclear, and many others.
Topics include: demutualization and growth, what the new US administration means for African markets, financial inclusion, pensions, liquidity, green finance, global principles on IT infrastructure, and regional integration of exchanges in East, West and Southern Africa.
It will be held at Casablanca Most Events Business Center, Anfa Place, Casablanca, Morocco. Don’t miss a great chance to meet the drivers of Africa’s capital markets development. For more, check the Casablanca Stock Exchange website page.

Uganda Capital Markets Authority joins IOSCO MMoU Appendix A

Capital Markets Authority (CMA) Uganda has taken a big step forward for international links, after changes to Ugandan law. CMA been admitted by global securities standards setter International Organization of Securities Commissions (IOSCO) as a signatory to Appendix A of the IOSCO Multilateral Memorandum of Understanding (MMoU).

The MMoU provides an international benchmark for cross-border cooperation and offers securities regulators tools for combating cross-border fraud and misconduct. Uganda’s regulator will have increased access to knowledge and research through the IOSCO network.

The admission follows the recent amendment of Uganda’s CMA Act. The capital market regulator becomes the 112th member to append its signature to the memorandum, which was instituted in 2002.

Keith Kalyegira, the CEO of CMA, said in a press release: “This is a big step for CMA and Uganda in general and I must thank all the stakeholders that have been very instrumental in enabling us to reach this milestone including the CMA Board; our parent ministry of Finance, Planning and Economic Development; Parliament of Uganda; and the Ministry of Justice and Constitutional Affairs which has tirelessly worked with us to enhance our regulatory framework so that it can fit international standards.

“Our desire going forward is to transform Uganda’s capital market into one of the most efficient, and trusted centres for attracting capital and providing capital in Africa, and this could not easily be achieved without enhancing our regulatory framework to fully suit international standards by ensuring we comply with Appendix A requirements”.

CMA Uganda became a member of the IOSCO Appendix B in 2007 and has since been compliant with most of the international best practices in regulation. However, its participation, engagement and contribution to international dialogues was limited.

The IOSCO MMoU supports mutual cooperation, assistance and consultation among members to ensure compliance with, and enforcement of securities laws and regulations. It is a response to more international activity in securities and derivatives markets.

The formal signing ceremony will be held at the 42nd IOSCO annual conference due in Jamaica in May 2017. CMA first applied to IOSCO to become a signatory to the IOSCO MMoU in September 2007, and was assigned to Appendix B. The capital market regulator proactively started steps over several years towards legislative change to bring Uganda’s legislation into compliance with the MMoU. The reapplication was submitted to the IOSCO General Secretariat in July 2016.

East Africa regulator links

CMA is also a member of the East African Securities Regulatory Authorities (EASRA), which is instrumental in the development of the capital markets industry in East Africa. This includes some joint oversight activities, particularly for financial firms operating in more than one of the East African Community EAC countries. CMA Uganda also does joint inspections with its Kenyan counterpart.

Uganda’s growing capital market

CMA recently concluded its 5-year strategy, and expects to launch a 10-year capital markets development master plan by the end of March. This will map a growth plan for Uganda’s capital market which already includes 2 Ugandan securities exchanges. It will lay a strategy for increasing access to patient capital to finance the growth of commerce and industry in Uganda.

In Uganda, CMA cooperates with other government agencies in the financial sector including Bank of Uganda, the Insurance Regulatory Authority, the Uganda Retirement Benefits Regulatory Authority (URBRA), and the Uganda Registration Services Bureau. The Uganda Registration Services Bureau acts as the Registrar of Companies and implements the Companies Act, 2012 (Companies Act).

It also works with law-enforcement agencies such as the Office of the Attorney General, Director of Public Prosecutions and the Uganda Police. CMA, Bank of Uganda and the Uganda Insurance Commission (now the Insurance Regulatory Authority) signed a Memorandum of Understanding to facilitate cooperation and exchange information in the securities, banking and insurance sectors.

Trading of listed securities is conducted through the Uganda Securities Exchange (USE), established in 1998. There are 16 listed companies on the USE, of which 7 are from privatization of government parastatals. Trading of government bonds on the USE was introduced in 2004.

In July 2015, an automated trading system was introduced on the USE. The clearing and settlement period is 3 days (T+3). A computerized Securities Central Depository System (SCD) was put in place in 2010 following the enactment of the Securities Central Depositories Act (SCD Act) in 2009. The SCD has enabled the USE to automate the clearing and settlement process.

On 4 March 2014, CMA’s Board of Directors considered and approved the application of ALT Xchange East Africa Limited to operate as a stock exchange in Uganda in accordance with the CMA Act.

Kampala view (credit www.enjoyuganda.info)

Regional integration tops 2017 agenda for Africa’s exchanges

Stock exchanges across Africa should be working towards regional integration, says Prime Minister of Rwanda Anastase Murekezi. He was guest speaker at the 20th African Securities Exchanges Association (ASEA) annual conference. The conference’s action agenda would see the regulated stock exchanges driving industrialization and economic transformation.
Panel discussions highlighted the opportunities for African exchanges, provided they adapt to meet the needs and demands of local investors and issuers. They must also find the balance between local context and environment, and alignment with global best practices.
Government support and engagement are keys to the success of exchanges and to providing the capital to grow economies. Governments should continue to create enabling environments that encourage investment, economic growth and development. Regulation should follow market needs and focus on supporting development as favourable regulatory frameworks are essential for sustainable economic growth.
Other challenges the exchanges should continue to work on include: financial inclusion or letting more people access the capital markets for investing and for raising long-term risk capital for their enterprises; financial literacy and investor education; product innovation including using technology and creating innovative platforms for new products; and finding ways to finance the missing middle of small and medium enterprises (SMEs) in Africa.
Exchanges should encourage greater emphasis on environmental, social and governance components to enhance corporate transparency and performance.
Celestin Rwabukumba, CEO of the Rwanda Stock Exchange, said innovation and technology would enable Africa’s capital markets to harness resources to fuel structural transformation: “Currently, less than 5% of the African populace participate in the capital markets; this means that there is a huge opportunity to widen the base of African capital markets by incorporating new models based on technology and other creative innovations that target provision of direct linkages with the ordinary citizens in order to bring them in the loop of resource mobilization and utilization”.
The 20th ASEA conference brought together 300 delegates, including securities exchange CEOs, regulators, ministers, investors and others. It was held in Kigali on 28-29 November 2016. The theme was “Road to 2030: Making the African capital markets relevant to the real economy”.
Speakers included Claver Gatete, Rwandan Minister of Finance, and Prime Minister Murekezi delivered a message from the President of Rwanda, His Excellency Paul Kagame, in which he commended ASEA for its role in deepening the capital markets as a way of addressing the challenges that hampered Africa
Other speakers included Prof. Kingsley Moghalu, (former Deputy Governor of the Central Bank of Nigeria), Tonye Cole (founder of Sahara Group), Staci Warden (Executive Director, Milken Institute), Sandy Frucher (Vice Chairman of Nasdaq), Paul Muthaura (CEO Capital Markets Authority Kenya), David Grayson (Co-founder and CEO of Auerbach Grayson & Company), as well as CEOs from ASEA member exchanges.

New South African stock exchange ZAR X to start 3 October

Trading is to start on South Africa’s new ZAR X securities exchange on 3 October. It gained a licence on 2 September and the first listings will be Senwes and  Senwes Beleggings, with up to 5 listings planned for first week October.

Another exchange is also being readied, 4AX also called 4 Africa Exchange (see story below).

South Africa’s regulator, the Financial Services Board, announced on 2 September that it had granted licences to ZAR X and 4 Africa Exchange Licences. It said: “The Registrar of Securities Services.. received and considered applications for exchange licences from ZARX (Pty) Ltd (“ZAR X”) and 4 Africa Exchange (Pty) Ltd (“4AX”) and has, in terms of section 9(1) of the Act, granted ZAR X and 4AX exchange licences with conditions after careful consideration of objections received as a result of a notice referred to in section 7(4).”

Initially FSB gave ZARX a conditional licence but in August a court ruled in favour of an application by the JSE, which had argued there was no provision for conditional licensing. JSE CEO Nicky Newton-King said at the time there were concerns about the complexity and the potential for systemic risk that multiple exchanges could bring.

ZAR X has a different level of risk as it requires to be pre-funded, which means that participants must lodge scrip and cash before they trade and settlement is then the same day (T+0). In July the JSE and other market participants moved their market from T+5 settlement to T+3 without any problems. Most institutional investors prefer transferring stocks or money after they have traded, when they know the exact amounts to transfer.

Etienne Nel, CEO of ZAR X, said: “We need to create a level of co-operation within the market space to make it as simple as possible for all participants to coexist”.

Speaking to Business Day TV, he said: “..we are very happy, obviously, delighted since it’s been a long time coming. To give you some context around the conditions, it’s obviously what we applied for. We initially said we were not going to be offering derivatives to the market and obviously as a result one of the conditions is we may not offer derivative trades on our market. Similarly, we cannot offer shares already listed on another exchange, but that was never in our application so we are obviously delighted with the licence that we finally got.”

Nel said in September they were busy getting brokers on board and putting investors through necessary screening and checks of the Financial Intelligence Centre Act (38 of 2001 “FICA”)

Nel says ZAR X has less onerous rules on admitting companies for trading (listing requirements): “In our approach to listings.. we will have a conversation with the issuer and we are taking what is called a principles-based approach to listing rather than rules-based. Now what that achieves is if we get the slightest inclination that something is awry within a company we would actually rather walk away rather than doing the listing.. A rules-based environment .. becomes a tick-box exercise and in that environment you would end up with a situation where people end up finding loopholes, which a principles-based approach does not allow for”.

It breaks over 100 years of monopoly Africa by the Johannesburg Stock Exchange, as the JSE was founded in 1887 but there were several stock exchanges around during the first South African gold rush. Speaking after the licence was issued, 4AX CEO Fay Mukaddam said in a press release: “We are delighted to have secured our licence. South Africa is a vibrant, growing market with enormous potential and we are confident that there’s a strong appetite for an additional licensed exchange to further develop and deepen the capital markets in the country.. 4AX can stand as a vehicle for diversity, which in turn, will drive real economic inclusion”. It will be an “empowered exchange” and will aim at retail investors but also attract institutional trading.

Both ZARX and 4AX will use Strate as their central securities depository (CSD).

 

Etienne Nel, CEO of ZAR X (credit timeslive.co.za)

Etienne Nel, CEO of ZAR X (credit timeslive.co.za)

About 4AX – new South African securities exchange

South Africa’s second new exchange, which also got a licence according to the 2 September announcement by the Financial Services Board (FSB), is 4AX, also known as 4 Africa Exchange. It plans to trade securities that are currently traded over-the-counter (OTC) and to go live early in 2017.

Speaking after the licence was issued, 4AX CEO Fay Mukaddam said in a press release: “We are delighted to have secured our licence. South Africa is a vibrant, growing market with enormous potential and we are confident that there’s a strong appetite for an additional licensed exchange to further develop and deepen the capital markets in the country.. 4AX can stand as a vehicle for diversity, which in turn, will drive real economic inclusion”. It will be an “empowered exchange” and will aim at retail investors but also attract institutional trading.

According to the background on its website: “A unique situation in South Africa has however created the need for 4AX. Previously, a number of South African companies issued shares and facilitated trading in the over-the-counter (OTC) market using unregulated OTC platforms. The current OTC market boasts a combined market capitalisation in excess of R30 billion ($2.2bn).

“As the OTC market expanded, the FSB recognised a need for greater regulation to protect shareholders and ensure a fair, orderly and transparent marketplace for issuers. The FSB determined that all operators of unregulated OTC platforms must cease operating or apply to become licensed exchanges under the Financial Market Act of 2012 (FMA). Board Notice 68 of 2014 reaffirmed the view of the Registrar that operators of exchange infrastructure should be licensed and that a proliferation of exchanges should not be allowed. This has caused significant upheaval in the market, for both issuers as well as shareholders.

“As a result of the regulatory amendments a substantial number of OTC companies are now in breach of the FMA. Faced with significant potential penalties under the FMA these companies have either stopped operating their OTC platforms or applied for extensions from the FSB, whilst searching for an alternative to unregulated OTC platforms. 4AX provide the solution.

Maponya Group has a 15% shareholding, other shareholders listed on its website include Global Environmental Markets Ltd, Capital Market Brokers which is a leading member of the Stock Exchange of Mauritius, independent fiduciary Intercontinental Trust Ltd,  agricultural firm NWK, and investment banking firm Pallidus.

First graduate course for capital markets professionals

Capital markets practitioners across Africa can benefit from a graduate-level programme launched this week by the IFC, a member of the World Bank Group, the Milken Institute and the George Washington University.

The programme initially focuses on sub-Saharan Africa, and aims to expand to other regions. The curriculum is tailored to address challenges specific to developing economies, according to a press release.

Michael Milken, Jingdong Hua and Steven Knapp

Michael Milken, Jingdong Hua and Steven Knapp

The programme was launched on 3 May and the first 20 students from capital market authorities, central banks and ministries of finance in Angola, Democratic Republic of Congo, the Gambia, Kenya, Malawi, Mozambique, Rwanda, Uganda, Saudi Arabia, the Seychelles, and Zambia begin in August 2016 and will graduate in May 2017.

The course will equip mid-career professionals with the analytical tools and practical experience to support capital-market development in their countries. It is held over eight months and combines rigorous coursework and a work placement opportunity.

It leverages the academic excellence of the George Washington University School of Business, offering course work from financial modelling and computation to regulatory and legal aspects of capital-market development. The IFC boosts this with case studies drawn from it unparalleled experience in supporting domestic capital-market development in countries as diverse as the Dominican Republic, India, and Rwanda.

A speaker series will offer additional opportunities for interaction with thought leaders, practitioners and pioneers in the international capital markets. In the spring semester, program participants will put learning into practice through work placements with the Milken Institute’s wide network of public and private sector collaborators.

When they successfully complete the programme, participants receive an academic certificate from the George Washington University and are expected to return to their home countries to work on local capital markets for at least 2 years. They will also belong to an active alumni network that will collectively foster the next generation of capital market leaders in developing regions.

Michael Milken, Chairman of the Milken Institute, said: “Capital markets multiply the vast potential of human and social capital—and thereby contribute to economic growth and prosperity.”

Steven Knapp, President of the George Washington University, said “This unique partnership has the potential to bring millions of people in the developing world out of poverty by developing effective capital markets and stronger financial institutions. The program will make the connection between classroom instruction and real-world experience that is a hallmark of the George Washington experience.”

Jingdong Hua, IFC Vice President and Treasurer, said: “A well-functioning capital market is not a luxury; it is a necessity. Deep, vibrant capital markets are essential for a thriving private sector that creates jobs and enables economies to achieve their full potential.”

For more information on the program, visit cmp.milkeninstitute.org.

George Washington University

George Washington University

JSE Clear gets approval from European regulator ESMA

In a step forward for derivatives, clearing and settlement in Africa, the European Securities and Markets Authority (ESMA) has recognized JSE Clear, the derivative central counterparty (CCP) owned by the Johannesburg Stock Exchange. Stephen Maijoor, Chairman of ESMA’s Board of Supervisors, says in a letter to the JSE: “JSE Clear is recognized as a third country CCP under Title III of Chapter 4 of EMIR.”

This means that the European Union’s regulator recognizes JSE Clear as “equivalent” to CCPs in the EU.

The JSE and the Financial Services Board (FSB) worked together closely to obtain EU recognition, says Leila Fourie, Executive Director of the JSE. JSE Clear’s process to securing ESMA recognition was undertaken in conjunction with the FSB, and successfully finished 2 pieces of work:
• Obtain decision from the EU recognizing that South Africa’s legal framework and supervisory practices are equivalent to those contemplated within the EU regulations
• Obtain EU acknowledgement of the appropriateness of our CCP design and risk management processes in terms of the functioning of the market it is meant to serve.

Fourie commented in a press release on 1 Feb: “This achievement is hugely important for the JSE, our regulator the FSB and participants in South Africa’s financial markets. Today’s announcement means that EU-based market participants that clear trades through JSE Clear will be permitted to continue clearing for investors trading on the JSE.”

JSE Clear is required to apply for recognition by ESMA (the European Securities and Markets Authority), as a result of the fact that the CCP has Clearing Members that are either branches or subsidiaries of European registered entities.

Fourie added: “ESMA recognition strengthens our global credibility and fulfils a key requirement for multinational clearing members operating in the local market. Participation from these multinationals helps to distribute the credit, liquidity, operational and legal risk on our market – instead of concentrating this risk in a smaller number of clearing members.”

Central counterparty - graphic from www.economist.com

Central counterparty – graphic from www.economist.com

SA rules are globally relevant
“It is vital for South Africa that its rules are globally relevant and consistent with financial centers such as the EU. This milestone demonstrates that our CCP is robust and meets global standards in promoting financial stability and reducing systemic risk. The recognition of equivalence is a significant indicator of the rigidity of SA’s market infrastructures, and will aid in attracting international flows to our emerging market.

“The JSE is grateful to the FSB for their contribution in obtaining this major milestone for JSE Clear and the South African markets.”

“Clearing” denotes all “post-trade” activities from the time a securities transaction is executed until it is settled. A CCP is an organization that helps to reduce risk and safeguard against losses that could be incurred by a default of a trading participant when trading on the JSE’s markets.

JSE Clear was among the first in the world to be granted QCCP IOSCO status, i.e. marking it out as a “qualifying” CCP in terms established by the Basel Committee on Banking Supervision in July 2012. CPSS-IOSCO is a global standard for risk management aimed at any organization enabling the clearing, settlement and recording of a transaction.

The decision from ESMA follows earlier equivalence determinations for CCPs in Australia, Singapore, Japan and Hong Kong.

The JSE is one of the top 20 exchanges in the world in terms of market capitalization and is a member of the World Federation of Exchanges (WFE) and Association of Futures Markets (AFM). The JSE offers a fully electronic, efficient, secure market with world class regulation, trading and clearing systems, settlement assurance and risk management.

NAMFISA becomes IOSCO associate member

The Namibia Financial Institutions Supervisory Authority (NAMFISA), the regulator of Namibia’s stock exchange and many other organizations, has been accepted as an associate member of the International Organization of Securities Commissions (IOSCO). IOSCO is the leading international body of securities regulators and administrators and its members regulate over 95% of world securities markets.

Kenneth Matomola

Kenneth Matomola


IOSCO is having increasing impact on African regulators, helping them to work together to advance standards in the national securities markets, including working through African regional associations of regulators such as the Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA) of the Southern African Development Community (SADC).
NAMFISA’s acting CEO, Kenneth Matomola, said attaining IOSCO membership is a significant step in NAMFISA’s quest to become a respected regulator of the financial industry. IOSCO associate membership enables NAMFISA to gain wider exposure and exchange best practices with fellow regulators from all over the world. “This newly-acquired membership sends a strong message that the authority is respected for its ability to regulate the securities market locally. It indeed speaks volumes of NAMFISA’s place in the global securities community,” he observed.
IOSCO has 3 types of membership. Ordinary membership is open to securities commissions and other governmental agencies. Associate membership is available to other agencies that regulate in an environment where there is an existing national regulatory body. Affiliate membership is available to entities which carry out self-regulatory functions, such as stock exchanges.
IOSCO associate membership gives NAMFISA a seat on the IOSCO Presidents Committee. It is also eligible to become a member of IOSCO Growth and Emerging Markets Committee and to participate in the Africa Middle East Regional Committee meetings.
IOSCO ordinary members listed on IOSCO’s website which are based in Africa are: Algeria’s Commission d’Organisation et de Surveillance des Opérations de Bourse; Central Africa regulator Commission de Surveillance du Marché Financier de l’Afrique Centrale (Securities and Exchanges Commission of Central Africa) based in Gabon; Egyptian Financial Supervisory Authority; Ghana’s Securities and Exchanges Commission; Kenya’s Capital Markets Authority; Reserve Bank of Malawi; Mauritius’ Financial Services Commission; Morocco’s Conseil déontologique des valeurs mobilières; Nigeria’s Securities and Exchanges Commission; South Africa’s Financial Services Board; Tanzania’s Capital Markets and Securities Authority; Tunisia’s Conseil du marché financier; Uganda’s Capital Markets Authority; the Conseil regional de l’épargne publique et des marches financiers of the West African Monetary Union, based in Abidjan Côte d’Ivoire; and Zambia’s Securities and Exchange Commission.
The associate African members are: Angola’s Comissao do Mercado de Capitais; Botswana Non-Bank Financial Institutions Regulatory Authority; Namfisa; and Rwanda’s Capital Market Authority.
IOSCO’s objectives are to cooperate to promote high standards of regulation to maintain just, efficient and sound markets; to exchange information on their respective experiences to promote the development of domestic markets; to unite efforts to establish standards and an effective surveillance of international securities transactions; and to provide mutual assistance to promote the integrity of the markets by a rigorous application of the standards and by effective enforcement against offences.