From below Zero to Hero

STRATE is the authorised Central Securities Depository (CSD) for the electronic settlement of financial instruments on the JSE Securities Exchange in South Africa. It currently handles the settlement of equities (shares) and warrants.

Significantly, STRATE has ambitious plans to extend its operations to other financial instruments. It aims to provide value-added services to the financial community – not only for South Africa but also for the region as a whole.

According to GSCS Benchmarks, an internationally respected British publication that tracks settlement efficiency rates among the world's stock markets, South Africa suffered a settlement risk rating of -3,42% in 1999. That was before the introduction of STRATE.

By the second quarter of 2002, South Africa had soared to a highly impressive rating of 95,32%. It was a performance that shot South Africa up from worst position of 20th to 8th in the emerging market rankings.

The introduction of STRATE has therefore accorded South Africa phenomenal international settlement ratings. But that's not all. We are also one of the few stock exchanges in the world not to have experienced a single on-market failed trade since electronic settlement was introduced.

STRATE initially purchased the SECOM system from Switzerland and customised it as SAFIRES (Southern African Financial Instruments Real-time Electronics Settlement system) to meet the needs of the South African market. This customisation was effected with the specific objective of complying with G30 recommendations.

The end of 2001 saw all 630 of the JSE Securities Exchange's listed equities fall under a STRATE umbrella that contains features as sophisticated as any international CSD.

STRATE is a clearing, settlement and depository facility for equities and warrants. It achieves rolling, contractual, guaranteed settlement through electronically effective delivery-versus-payment on a net cash, net scrip basis.

One of the ultimate aims of all securities settlement authorities worldwide is to achieve true simultaneous, final, irrevocable delivery-versus-payment (SFIDvP) in central bank funds. STRATE achieves true SFIDvP via the SA Reserve Bank national payment system's concurrent batch processing line. This is a crucial building block in the globalisation of any nation's securities markets.

STRATE has designed, developed and implemented a settlement model containing three levels of netting -- at broker level, at CSD Participant level and at cash level across all counters. The netting engine links the cash root directly to the scrip root, thereby eliminating any unnecessary intermediaries in the settlement cycle.

On 6 August 2001, STRATE implemented its new automated corporate actions model, the significance of which cannot overestimated. The benefits derived from the model include:

• The electronic payment of dividends;
• Guaranteed payment of dividends on due date; and, most importantly,
• The elimination of market claims.

The elimination of market claims is an objective that still eludes CSDs worldwide. The attainment of this objective ranks STRATE as a world leader in the administration of corporate actions.

Underlying all future initiatives is STRATE's determination to become a truly world-class CSD. Foreign investors gain the peace of mind that STRATE and the JSE, governed by the Financial Services Board, regulate all business processes associated with electronic settlement.

The key features of electronic settlement contribute to a massive reduction of risk in the South African market, in the process enhancing South Africa's standing as an investment destination for international investors.

For a country so desperately in need of foreign investment, STRATE's ability to boost international investor confidence in South Africa is of paramount importance to the nation's future prosperity.

STRATE Ltd.
Physical Address:
5th Floor
One Exchange Square
Gwen Lane
Sandown
2196

Postal Address:
PO Box 78608
Sandton
2146
South Africa

Phone: +27 11 520 7700
Fax: +27 11 520 8600
Email: liaisondesk@strate.co.za
Web: www.strate.co.za

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