Orientation Programme

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SECURITY SERVICES BILL, 2004
PRESENTATION TO THE PORTFOLIO COMMITTEE ON
FINANCE BY Samantha Anderson, Director of
Financial Markets 12 August 2004
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OVERVIEW OF PRESENTATION

• HISTORY OF SOUTH AFRICAS FINANCIAL MARKETS
• KEY DEVELOPMENTS SINCE 1994
• THE FUTURE OF SOUTH AFRICAS FINANCIAL MARKETS

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HISTORY OF SOUTH AFRICAS FINANCIAL MARKETS

• DEFINING STAGES OF DEVELOPMENT
• 1680s 1880s Tradable paper in agricultural
  commodities African Theater Company in
  1782 Joint Stock Companies Limited
  Liability Act, 1861
• 1880s 1940s Kimberley Royal Stock Exchange
  1881 twenty four stock exchanges in
  South Africa in mid-1880s JSE founded
  in November 1887 uniform rules for all stock
  exchanges in 1890 regulation of brokerage
  commission
• (3) 1940- 1990s Boom years of 1945 and
  1946 (discovery of gold in the Free
  State) Stock Exchanges Control Act, 1947
  establishment of the Financial Institutions
  Office 1956 Stock Exchanges Control
  Act of 1985 Financial Markets Control
  Act of 1989 Financial Services Board -
  1991

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KEY DEVELOPMENTS SINCE 1994

• JSE SECURITIES EXCHANGE SOUTH AFRICA - EQUITY
• 8 November 1995, JSE changed its organisational
  structure - limited liability corporate and
  foreign membership was permitted
• Dual capacity trading, negotiated commissions and
  automated trading in selected securities were
  phased in from 8 March 1996
• The open outcry trading floor was closed on 7
  June 1996 and replaced by fully automated
  electronic trade in respect of all listed
  securities on the JET System

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KEY DEVELOPMENTS SINCE 1994
Source JSE
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KEY DEVELOPMENTS SINCE 1994

• JSE SECURITIES EXCHANGE SOUTH AFRICA EQUITY
  (contd.)
• On 18 August 1997, JSE introduced a real time
  news service for the dissemination of company
  announcements and price sensitive information -
  SENS (Stock Exchange News Service)
• 1997 Immobilisation and subsequently
  dematerialisation of share certificates began
  dematerialisation completed in March 2002
• In November 1999, the electronic clearing and
  settlement system, STRATE (Share TRAnsactions
  Totally Electronic) was introduced

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KEY DEVELOPMENTS SINCE 1994

• JSE SECURITIES EXCHANGE SOUTH AFRICA - EQUITY
  (contd.)
• The JSE merged with Safex in 2002 to broaden its
  product range and achieve economies of scale
• JSE/FTSE Africa Index Series launched in 2002
• King Code Listings requirement updates in 2002
  and 2003
• STRATE and Unexcor/ CD Limited merge in 2003
• JSE launches ALTx and SRI Index in 2003

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KEY DEVELOPMENTS SINCE 1994

• BOND EXCHANGE OF SOUTH AFRICA (BESA) - DEBT
• The process towards the establishment of BESA
  began with the formation of the Bond Market
  Association (BMA) a voluntary association formed
  by the major participants of the bond market with
  75 members
• May 1994 - the Bond Market Association (BMA)
  appoints the Universal Exchange Corporation Ltd
  (UNEXcor) as the clearinghouse for all BMA
  transactions
• 1995 CD Limited takes on all listed bonds to
  facilitate electronic settlement of all
  transactions executed on the BMA
• 26 October 1996 full electronic settlement
  through UNEXcor and CD Limited takes place
• 15 May 1996 BMA became BESA a self-regulatory
  body licensed under the Financial Markets Control
  Act No 55 of 1989

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KEY DEVELOPMENTS SINCE 1994

• BOND EXCHANGE OF SOUTH AFRICA (BESA) - DEBT
  (contd.)
• In November 1997 the settlement period on BESA
  was reduced from T10 to T3 rolling settlement
  in line with G30 recommendations
• In October 1998 the open outcry bond floor was
  closed, and trading now takes place via
  inter-dealer brokers screens and / or via
  telephone using prices published by data vendor
  firms.
• 2000
• Trades booked on new Bond Automated Trading
  System (BATS).
• BESA implements the Total Return Index (TRI)

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KEY DEVELOPMENTS SINCE 1994

• BOND EXCHANGE OF SOUTH AFRICA (BESA) - DEBT
  (contd.)
• 2001
• BESA lists first mortgage-backed securitisation
• BESA members approve restructuring plan

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KEY DEVELOPMENTS SINCE 1994

• SOUTH AFRICAN FUTURES EXCHANGE (SAFEX) -
  DERIVATIVES
• SAFEX is licensed under the Financial Markets
  Control Act of 1989 in 1990
• January 1995 SAFEX Agricultural Derivatives
  Division opens
• May 1996 - Introduction of fully-automated
  trading
• September 1997 - Individual equity options
  introduced on the six largest equity counters
• March 1998 Options introduced on agricultural
  products
• SAFEX and JSE merge in 2002

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THE FUTURE

• The structure of internationally exchanges is
  changing service providers rather than clubs
  for members - demutualisation
• Global competition from institutions that are not
  traditional exchanges
• Regulation is moving away from defining an
  institutional structure for the provision of
  security services
• Efficiency, security and cost effectiveness of
  trading, clearing and settlement is key
• International financial architecture compliance
  with standards and codes

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THE FUTURE

• South Africa to position itself as a Financial
  Centre for Africa
• Inward Listings
• New markets and products
• Lowest cost of trading
• Investor protection
• Foreign pool of talent
• Business Processing Outsourcing

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• QUESTIONS?