Project Status

1

STP Forum
Feedback session to industry
2003-09-02
2
Agenda

• Welcome
• Project review
• The strategic framework for STP
• Task group mandates
• Feedback from task groups
• The way forward
• Questions

Arthur
3
Objectives of STP Forum initiative

• To achieve delivery versus payment (DvP) at the
  earliest practical point in time after trade in
  order to mitigate risks.
• To achieve the maximum level of automation from
  order through to trade execution (efficiency,
  risk reduction, etc)

Arthur
4
Approach adopted
STP project

• Collaboration
• High level of involvement
• Developing a common understanding
• Industry consensus

Philip
5
Original timeline
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Initial meeting at STRATE
Preparation of first draft of conceptual
framework
Feedback to wider industry group
Exploratory work by task groups
Publication of blueprint
Second quarter 2003
Complete drafting of blueprint
Philip
6
Blueprint development process

• Vision
• Principles

STEERING GROUP
Formulate STP strategic framework
Test against wider
CHECKPOINT
audience
TASK GROUPS
Scrip lending and borrowing
Trade initiation
Clearing and settlement
Corporate actions
Determine feasibility and lower level detail on
issues relating to vision and principles
STEERING GROUP
Finalise STP blueprint
Philip
PUBLISH BLUEPRINT
7

Definition of STP in equities market

• Automated activities from beginning to end,
• that is from order placement through to
  confirmation of the recording of cash received on
  cash account and the recording of the securities
  received in the safe custody account
• Includes
• Machine-to-machine and organisation-to-organisatio
  n information interchange
• Applies to
• On and off market trades
• Excludes some securities due to practical
  considerations

Philip
8
Objective of STP

• The automation of activities in the securities
  industry, from beginning to end, in order to
  enable cross organisation and cross system
  integration.
• Scope of the STP Forum initiative
• Focus on the equities market but cognisance is
  taken of other securities markets in order to
  create a business model that can be applied in
  the other securities markets.

Philip
9
The vision for STP in the South African markets
Philip
10
The STP vision

• South Africa is market leader in move to STP
• Market operates on agreed standards and
  standardised operational windows
• Market participants understand underlying
  business processes
• A widely publicised end-to-end business process
  exists
• SA processes are integrated with international
  markets
• Intraday scrip lending facilitated
• Instrument ownership records model is aligned
  with international best practice
• DVP is achieved within timelines proposed in G30
  recommendations
• Market participants are incentivised to comply
  with STP process
• The legal framework enables STP
• Inefficiencies eliminated thereby reducing
  clearing and settlement costs

Philip
11
Towards an STP Blueprint
Philip
12
Task groups
Strategic framework
Angela Hardwick
Brett Kotze
Iann Seymore-Smith
Grant Nelson
MANDATE
Scrip lending and borrowing
Corporate actions
To work out how strategic framework can be
implemented To obtain industry agreement
on -start and end point of process stage -the
detailed business process -where the
responsibility shifts from one party to another
Trade initiation
Clearing and settlement
Finalise STP blueprint
PUBLISH BLUEPRINT
Philip
13
Trade initiation
Task group output Documented process flows A
generic model for all instruments FIX standard
for pre-trade and ISO 15022 for post-trade It has
been agreed that pre-trade will include
allocations Contract notes will be included in
ETC clearing and Settlement In terms of actions
going forward, the buy-in from brokers and fund
managers, as well as comments on the way forward
are required It is suggested that the task group
(ETI Task Group) continues to take the market
forward
Strategic framework Trades initiated
electronically Firm orders to contain all
information to complete order AOE and NOE
available electronically BONs available
electronically, where required Allocations
effected continuously, on T, after AOE or BON
Brett
14
Clearing and settlement
Electronic contract notes provided
electronically, on T, after allocation Affirmation
triggers settlement allegement and settlement
instruction Once affirmed trades are done
deals Allegements effected in realtime Status
intimations re non-commits Rejections in
real-time Corrections by agreed-upon
time Operational windows re-aligned Operational
windows used for incentives
Same rules for on and off exchange trades DvP at
safe custody account level Guaranteed settlement
for main board trades Central bank funds apply
between CSDPs Common participant id codes
used Same day facilities Client advice of
settlement
Movement available on a daily basis Statements of
holdings provides to JSE by CSDPs Unreconciled
position statements provided on
request Reconciliation between CSDPs and STRATE
daily
Strategic framework
Agreement on implementation of an automated
off-market transaction process Automated
off-market transactions are not instrument
dependent The settlement allegement will only be
generated after affirmation by the Investment
Manager of the contract note This will reduce
rejections and messages The rest of the process
largely remains the same
Task group output
Iann
15
Corporate actions
Task group output Many of the CA processes in
terms of shortened settlement times etc are
dependent on the resolution of these issues in
the clearing and settlement forums However the
CA  STP sub-committee did meet to review the CA
changes identified by STRATE as potential Phase 2
changes in the as-is scenario.  These
requirements have been refined and will flow into
the normal STRATE structures e.g. the CA
sub-committee and from there into SWC STRATE
have prepared a model of the as-is scenarios
which will be reviewed in the sessions referred
to above after which this can be distributed to
interested parties as a working document.
process flows
Strategic framework Entitlements received on due
date Issuers comply with listing and corporate
action rules w.r.t. complete information Fully
automated corporate action processes using the
agreed standard
Angela
16
Lending and borrowing
Strategic framework Automated claims
processing Instructions between parties
standardised and electronic Virtual pool concept
(to be explored)

• Task group output
• 3 main areas have been analysed
• - Corporate actions
• - Collateral management
• Intra-day trading
• STP within securities lending is being addressed
  by SASLA

Grant
17
The way forward

• ?????

Arthur
18
Questions?
Panel