the move to t+3 - jse3... · training topic: content to be covered: time ... - overview of the...

The move to T+3 Phase 3 Training – Module 2

JSE: Post-Trade and Information Services

2016

2

Agenda – Module 1

Module 1

Training Topic: Content to be covered: Time

T3 Intro Why are we doing this / Benefits / Known areas of Concern etc. 20 mins

T3 Timeline Overview Overview of the new timeline / comparison to T5 timeline 20 mins

CA Timeline Overview Overview of the new timelines for the different CA classes 20 mins

BDA Timelines Overview Including treatment of JSE trustees etc. 20 mins

BDA Explanation of how the calculation of SFA's work 30 mins

Margins Explanation of the timing of commits and impact on margin flows 10 mins

Automations in BDA Prime Broking, Account Transfers, Entitlements (DL and Uploads), SLB uploads, SLB (automation of messages)

60 mins

3

Agenda – Module 2

Module 2

Training Topic: Content to be covered: Time

Fails Management

Explain the causes (and mitigations of ) of failed trades (all scenarios)

90 mins

From a Settlement Authority perspective- how to pick up problem instruments

SLB (Settlement Authority Point of View)

Terminating vs. Non-terminating transactions

Rolling vs. re-transaction vs. compensation

ECS / BDA Integration (ECS 34)

New ECS screens around fails management and rolling of settlement

Front end BDA – elections / Adjustment screens 10 mins

BDA 10: - Explain calculation of terminating vs. non-terminating (and handouts ) - ECS 31 and 32 - BDA diagrams which explain transactions (entries on BDA for fails management)

30 mins

Migration Schedule Overview

- Overview of the migration week schedule (Week before and Week after) - Known areas of concern - Mitigations to be put in place

15 mins

Other Functionality - New Status Intimations / Spreadsheets & Fractions / Freezing of Registers

Testing Testing process overview 15mins

4

Agenda

• Fails Management

• The causes (and mitigations of) failed trades

• Compulsory Reverse Substitution

• SLB (Settlement Authority Point of View)

• How to pick up problem instruments

• Terminating vs. Non-terminating transactions

• Rolling vs. re-transaction vs. compensation

• ECS / BDA Integration (ECS 34)

• New ECS screens around fails management and rolling of settlement

• Front end BDA – Elections / Adjustment screens

• BDA0010

5

• Clients Instructions - on-market and off-market

• SLBs not done pre-trade and then find out no SLB available

• Arbitrage transactions and movement of securities between registers

• Dual Listed Companies – freezing of registers

• SLB - Corporate Actions:

• New entitlements not being loaned out until PD

• SLB where the Corporate Action is complex

• SLB due to tax implications

Causes of Failed Trades

6

Compulsory Reverse Substitution

• Fails Management can be dealt with anywhere throughout the cycle – T to T+2

• Deals that are not covered

• Compulsory Reverse Substitution batch run at 16h00 on T+2.

• ECS will execute Compulsory Reverse Substitution for any problem deals which

are not covered and the Broker has not executed a Voluntary Reverse

Substitution.

• ECS generates Compulsory Reverse Substitution transactions for controlled client

deal sale allocations that are “uncovered” as per the ECS timelines, and are thus

at risk of not settling.

7

Compulsory Reverse Substitution (cont.)


• Controlled Clients – sales

• Non-Controlled Clients – purchases and sales

• Purchases for controlled clients

• Reports sent to CSDPs on funding requirements (no cash available)

• If CSDP reports that they will not fund – broker will be instructed to reverse and

Failed Trade Management will be done

• Proprietary Account sales – monitored from BOD T+2 (SFAs sent from BDA at EOD

T+1)

8

Securities Lending & Borrowing (SLB) – Settlement Authority

• Securities Lending and Borrowing is still the first line of defence for the

market and Settlement Authority

• Broker still has to do SLB from 16h00 to 18h00 on T+2 – or earlier if VRS

• Settlement Authority acts as lender of last resort – and can only loan to

brokers for proprietary shorts which could as a result of a clients short

• If broker is aware of an issue – can advise the Settlement Authority from T –

Settlement Authority can do SLBs from T

• Settlement Authority takes over SLB from 08h00 to 10h00 on S (T+3)

9

Securities Lending & Borrowing (SLB) – Settlement Authority (cont.)

• Working with South African Securities Lending Association (SASLA) on

increasing liquidity

• Reg 28 (on pension funds) – allows lending to the JSE Settlement Authority

directly – still want to go through lending desks

• 600 to 800 loans per day – not enough staff or time in the day – early

detection is imperative

• Developing ECS to “publish” required securities to brokers

• Brokers can respond with amount/BDA acct no/lending rate – get client to sign

mandate

• ECS will automatically generate SLB messages

• Brokers can extract off ECS for upload to BDA for SLBs

10

ECS Screens – SAT lending and borrowing

• Automated lending and borrowing process (sourcing of securities)

• Partial borrowing on problem deals

600 SOL SAT borrow

Sale 2 000 AGL

1300 AGL SAT borrow

700 AGL FT

Sale 1 000 SOL 400 SOL ROS

11

Identifying Shorts - Problem Instruments

• Agreed with the market that Fails Management will only take place after

CRS:

• Back-To-Back Links and / or Dependency Links can be done until this time

• Deals can be reversed to stock accounts – final action Compulsory Reverse

Substitution (CRS)

• At 15h50 (before CRS) BDA sends last coverage (SFAs) for Controlled Client

deals – BDA0009C

• After CRS, BDA sends coverage(SFAs) for reversed deals to proprietary –

BDA0009P

• This forms the basis of the shorts in the market

12

Identifying Shorts - Problem Instruments (cont.)

• Brokers still have to do SLB until 18h00 on T+2 – if the problem instrument

has been identified. Settlement Authority can start the fails management

process. It is vital that SLB entries are done on BDA

• BDA sends SFAs at EOD T+2 for proprietary accounts – this is the final basis

of fails management on T+3

13

Identifying Problem Instruments

• The "Identify Problem Instruments screen" displays all problematic

instruments identified after the Compulsory Reverse Substitution (CRS) batch

run is completed. All deals that have 'no cover' or 'partial cover' are displayed

on the "Identify Problem Instruments screen”

• The user has two options :

• To notify the market of the problematic instruments by sending an automated

email message

• To inform the market that the problematic instruments have been resolved

14

Identifying Problem Instruments - ECS Screens

Problem instruments - all uncovered broker sales

15

Identifying Problem Instruments - ECS Screens (cont.)

16

Identify problem Instruments Fields

Field Name Description

Batch ID field This field displays a unique number that identifies a grouping of deals for the same problem instrument.

Alpha field This field displays the Alpha Code of the instrument.

ISIN Code field This field displays the ISIN Code of the instrument.

Settlement Date field

This field displays the Settlement Date. The Settlement Date defaults to the next Business Day, excluding weekends and public holidays.

Trade Type field This field displays the Trade Type. Refer to the "Trade Types" section for additional information.

Sent field This field displays the time that the message was sent to the relevant participants.

Received field This field displays the time that ECS received the terminating transaction message from BDA.

Completed field This field displays the time that the Failed Trade Process was completed for the problem instrument.

Status field

This field displays the status of the 'problem instrument'. One of the following statuses will be displayed:

Identified - This status indicates that ECS has identified all problem instruments.

Replaced - The batch, for the problematic instrument, has been replaced.

Completed - ECS has completed all processing for the selected batch.

Sent - ECS has notified the Market and BDA of the problem instrument.

Received - ECS has received the terminating transaction message from BDA.

Note: For additional information refer to the section "Statuses of a Problematic Instrument".

Select checkbox You would click the Select checkbox if you wish to notify the market of the problematic instrument, or you wish to inform the market that the problematic instrument has been resolved.

17

ECS Screens – Notifying the Market of FTMP

Sent = ECS0034 sent to BDA awaiting BDA0010

Received = BDA0010 received from BDA

• ECS0034 sent to BDA - Request for terminating and non-terminating transactions from BDA

• SWF598-116 sent to the CSDPs and Strate (List of problem instrument)

• Re-identify problem instrument (new batch id) = replaced

18

Message Instruction

• ECS0034 to BDA

• Generates BDA0010

• Stops all processing on BDA of the problem instrument only

• MT598-116

• Advising instrument with potential problems

• This could happen multiple times

• MT598-117

• Settlement orders selected for Failed Trade procedures

• Send to Strate and the applicable CSDP

• Strate will lift the commit based on this message and break links where applicable

• MT598-122 will be sent to cancel the order

• MT598-118

• Problem resolved

• ECS0035 message is sent to BDA

19

Notifying the market that a problematic instrument has been resolved

• Message sent to Strate and CSDP’s to inform them of the cancellation of the

problematic instrument

• An ECS0035 message is sent to BDA

• Status of the instrument will change to “COMPLETED”

20

Back-to-Back Links – MT 598-103

MT598-103

• Same settlement cycle

• Must include details of linked transactions:

• On-Market report only

• SLB

• Collateral

• Account Transfer

• Portfolio move

• SLB return

• Collateral return

• Off-markets

• Could be multiple links

21

Dependency Links – MT 598-104

MT598-104

• Future settlement cycle

• Must include details of linked transactions:

• On-Market report only

• SLB

• Collateral

• Account Transfer

• Portfolio move

• SLB return

• Collateral return

• Off-markets

• Could be multiple links

22

BDA terminating and non-terminating transactions

• ECS will request terminating and non-terminating transactions from BDA

– ECS0034

• BDA will supply – BDA0010:

• Controlled Clients transactions;

• Prime Broking transactions; and

• Broker proprietary – net amount

See subsequent slides on calculations

23

• Principle is that the non-failing party is not prejudiced and must be treated

as if their transaction settled

• Rolling of Settlement

• If circumstances are correct

• Retransaction

• Market liquidity

• Compensation

• Lack of Market liquidity

Failed Trade Actions

24

Fails Management by JSE Settlement Authority

• Primary

• Securities Lending and Borrowing

• Money Lending and Borrowing

• Then

• Rolling of Settlement:

• If circumstances are correct

• Then

• Failed Trade:

• Retransactions

• Compensation

For Failed Trade procedures we need to find opposite transactions

Failed Trade procedures

25

Equities Clearing System (ECS)

• Updates from Strate for links

• MT598-103

• MT598-104

• BDA0010 – Terminating Transactions

• Failed Trade procedures

• Look for a terminating transaction:

• Equal and opposite; then

• Highest to lowest

• Look for a non-terminating transaction with least impact:

• Account transfers

• Portfolio move

• Collateral

• SLB return

• Off-market

• Then



26

Flows Fails Management Rolling of Settlement

ECS will: 1. Generate cancellation to Strate for Client B to cancel purchase (MT 598-117 and then MT 598-122) 2. Generate Settlement Order for Broker D (purchase) to replace failing trade for Client B 3. Generate Settlement Orders to move purchase from Broker D ROS settlement account to Broker C’s

Reverse Sub account 4. Hold margin for original failing deal – Client A Sale

S P

100 AAA

R500 (4)

S P

S P

100 AAA

R500

0

100 AAA

R500(598-113) 100 AAA (3)

R1,000 (598-113)

R500

Compulsory

Reverse Substitution

100 AAA

R1,000

0

BDA to cancel original

Contract Note

100 AAA (1)

R1,000 (598-122)

S P

100 AAA (3)

R1,000(598-113) 100 AAA (2)

R1,000 (598-113)

0

Non-Controlled Client Acct

Client A


Client B

Reverse Subs Acct

Broker C

ROS suspense Acct

Broker D

27

Flows Fails Management Rolling of Settlement

ECS will: 1. Generate Settlement Orders for future settlement date 2. Return Margin held for original failing deal (Client A sale) once settled 3. Generate message to BDA with defaulting and non-defaulting transaction details including future

settlement date

S P

100 AAA

R500 (2)

S P

S P

100 AAA

R500

100 AAA

100 AAA

R500 100 AAA

R1,000

0

Broker C to

Do manual

Allocation

100 AAA

R1,000 100 AAA

R1,000 100 AAA (1)

R1,000 (598-113)

100 AAA

100 AAA (1)

R1,000 (598-113)

100 AAA

R500

100 AAA

R500

BDA to issue new

Contract note for new

Settlement date

S P

100 AAA

R1,000

100 AAA (2)

R1,000 (598-113)

0

100 AAA (1)

R1,000 (598-113) 100 AAA (1)

R1,000 (598-113)


Client A Non-Controlled Client Acct

Client B

Reverse Subs Acct

Broker C

ROS suspense Acct

Broker D

28

Flows Fails Management Retransaction

S S

100 AAA

R1,000

0

BDA to cancel original

Contract Note

100 AAA (1)

R1,000 (598-122)


Client B

100 AAA (3)

R1,000(598-113) 100 AAA (2)

R1,000 (598-113)

0

100 AAA

R500

S

100 AAA

R500

0

100 AAA

R500(598-113) 100 AAA (3)

R1,000 (598-113)

R500

Compulsory

Reverse Substitution


Client A

Reverse Subs Acct

Broker C

Failed Trade Suspense Acct

Broker D

P P

Settlement Authority will -

1. Generate cancellation to Strate for Client B to cancel purchase (MT 598-117 and then

MT 598-122)

2. Generate Settlement Order for Broker D (purchase) to replace failing trade for client B

3. Generate Settlement Orders to move purchase from Broker D’s Failed Trade suspense

acct to Broker C’s Rev Sub Acct

P P S

29

Flows Fails Management Retransaction

S P

100 AAA

R500 (2)

100 AAA

R500

0


Client A

S P

100 AAA

R500

100 AAA

R1,000

R500

Reverse Subs Acct

Broker C

R500

0

S P

100 AAA

R1,000 100 AAA

R1,000 100 AAA (1)

R1,000 (598-113)

CLAIM LOSS/PROFIT


Client B

BDA to issue new

Contract note for new

Settlement date S

100 AAA

R1,000

Re-transaction 100 AAA (1)

R1,000 (598-113)

100 AAA

R1,000

100 AAA

R1,500

Failed Trade Suspense Acct

Broker D

ECS will -

1. Generate Settlement Orders for future settlement when re-transacted to move re-booked

purchase to Client B

2. When re-transaction done send update message to BDA with future settlement

transactions

3. Return Margin held for original failing trade – Client A Sale once settled

30

Flows Fails Management Compensation

ECS will -

1. Generate cancellation to Strate for Client B to cancel purchase (MT 598-117 and

then MT 598-122)

2. Generate Settlement Order for Broker D (purchase) to replace failing trade for client B

3. Generate settlement orders to move purchase from Broker D’s ROS suspense acct to

Broker C’s Rev Sub Acct

4. Margin retained by ECS for original failing trade – Client A Sale

31

Flows Fails Management Compensation

1. Release margin to Broker A once compensations has settled

32

Failed Trade Management procedure

33

Rolling of Settlement - Overview

• Rolling of Settlement is performed at the discretion of the JSE Settlement

Authority

• It must be noted that transactions will only be rolled twice, although the JSE

Settlement Authority has the discretion to further roll transactions

• If a transaction is rolled twice, the JSE will undertake the Fail Trade Re-

transaction procedure or the Fail Trade Compensation procedure

• Rolling of Settlement can only be performed on a Broker’s Proprietary Position

Account (for the failing transaction) and not on the Non-controlled Client

Position Account or the Controlled Client Position Account

• Auto Rolling of Settlement

• Manual Rolling of Settlement

34

ECS Screens – Rolling of Settlement Processing (ROS)

• Automatic rolling of settlement

35

ECS Screens – Rolling of Settlement Processing (ROS)(cont.)

Automatic rolling of settlement logic

• Look for a termination transaction



• Look for a non-terminating transaction with least impact:

• Account transfers

• Portfolio move

• Collateral

• SLB return

• Off-market

36


• Manual rolling of settlement

37


• Manual rolling of settlement

BDA0010 non-terminating DPL/BTB non-terminating

38


• ROS where the contra is a non- controlled client • MT598-117 is sent to Strate and the applicable CSDP

• Strate will lift the commit based on this message and break links where applicable

• Above process is fully automated

- New Order generated due to Compulsory Reverse Substitution

39


• Manual rolling of settlement – non-controlled

• After ‘create’ follow the same process flow as per controlled client ROS

40


• ROS where the contra is a controlled client

41


• ROS where the contra is a controlled client (cont.)

• Closer look

Equal and opposite to the

market to resolve current

settlement issue

42



• Closer look – future deal

• Original trade date (except where there was an ISIN change)

• Settlement date = current cycle (settle in 3 days)

43



• Contra deal

44



• Contra deal – closer look

Equal and opposite to resolve current settlement issue

Booking into ROS account

Contra deal information – non-defaulting

broker

45



• Contra deal – closer look at future deal

Future deal – booking out of

suspense

Future deal – booking back to the client

46

• FTMP /Re-transaction

ECS Screens – Failed trade management processing (FTMP)

• Automatic failed trade

• ECS algorithm

• Manual failed trade

• DPL/BTB/BDA0010

47

• FTMP / Re-transaction (cont.)

Equal and opposite to

resolve current settlement issue


(cont.)

48



(cont.)

49



(cont.)

Original fail

trade information

Margin retained from FT

50



(cont.)

Re-transaction by SAT upon receipt of instruction from non-defaulting broker

51


(cont.)

• FTMP / Compensation

• Failed trade processing - current settlement cycle

Compensation processed by SAT

52

Agenda


• The causes (and mitigations of) failed trades


• SLB (Settlement Authority Point of View)

• How to pick up problem instruments

• Terminating vs. Non-terminating transactions

• Rolling vs. re-transaction vs. compensation

• ECS / BDA Integration (ECS 34)

• New ECS screens around fails management and rolling of settlement

• BDA Fails Management Functionality – BDA0010 / Elections / Adjustment screens

53

BDA Fails Management Transactions

We have a problem!

54


Step 1 Trade identified/Instrument known

Step 2 ECS 0034 Generated/e-mail send

Step 3 BDA Receives ECS 0034

Step 4 BDA suspends all deal updates for the affected share

DLPRE

DLADJ

DLXOP

NXTAL

55


Step 5 BDA suspends all updates to the frozen files for the affected shares

TDCOL COL FROZEN POSITIONS

TDFRA DETAIL FROZEN POSITIONS

TDSLB SLB FROZEN POSITIONS

RTCOL RIGHTS TAKE-UP FOR COLL

RTMNA RIGHTS TAKE-UP POSITIONS

RTSLB RIGHTS TAKE-UP FOR LOANS

ODCOL FROZEN ODD LOT FOR COL

ODDLT FROZEN ODD LOT POSITIONS

ODSLB FROZEN ODD LOT FOR SLB

RECOL COL EXCESS RIGHTS

RESLB SLB EXCESS RIGHTS

REXRT EXCESS RIGHTS MAINTENANCE

56


57


The e-mail that will be sent to the market From: ECS Testing Sent: 21 January 2016 03:00 PM To: JSE T3 Phase 3 Subject: FTMP #6505 for HCI 20160121 Initiated Failed Trade Procedures has been initiated by the JSE. Date: Jan 21, 2016 Time: 14:56 Instrument: ZAE000003257 Instrument Alpha: HCI Market activity and elections on HCI should be halted until advised by the JSE. Please contact [email protected] for any questions related to Failed Trade Procedures for HCI. If you have questions or concerns, please contact JSE Equities at 011 520-7083.

mailto:[email protected]

58


BDA screen shot of DLPRE in affected share

OPTN: DLPRE BCS/A: PREDATED DEAL FACILITY 21JAN16 15:08:49

ACTN: D21:FAILED TRADE IN PROGRESS ON INSTR XYZ 592

ACTION IND: M ACCOUNT CODE: 112672 ACC. TYPE : LL

ACCOUNT NAME: UNCLAIMED MIN.CHG.CDE: BKGE.PCNT.: 100

INSTR..: E HCI 0 SETTLE YYWW: 0000 SETTL-DTE: 20160126

NAME...: HCI CHG.STR.CDE: O1

DEAL ID: _______ P/S: P DATE: 20160121 DL.GRP.ID.: _______

R PAGE LN QTY AVG PRICE AMOUNT INN.ACC TERMS RI

_ 0000000001 01 2500 _ 1234.00 _________________ 40030 AL _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

CHARGES:

NEG.COM: __________________ IND: _ SCALE: ___

GRP.QTY: GRP.CONSID: _______________

CONSID: CHARGES: DEAL AMT:

PF1 HELP PF2/4 RTN PF5 ENQ PF7/8 PAGE PF9 NOTE PF11 ---> PF12 QUIT

59


BDA screen shot of DLPRE in an unaffected share

OPTN: DLPRE BCS/A: PREDATED DEAL FACILITY 21JAN16 15:10:56

ACTN: XYZ 592

ACTION IND: i ACCOUNT CODE: 112672 ACC. TYPE : LL

ACCOUNT NAME: UNCLAIMED MIN.CHG.CDE: BKGE.PCNT.: 100

INSTR..: E AGL 1 SETTLE YYWW: 0000 SETTL-DTE: 20160126

NAME...: ANGLO CHG.STR.CDE: O1 TRADE-CAP.: P

DEAL ID: _______ P/S: P DATE: 20160121 DL.GRP.ID.: _______


R 0000000001 01 2500 _ 5734.00 143350.00 40030 AL _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

CHARGES:

NEG.COM: IND: S SCALE: NIL


CONSID: 143350.00 CHARGES: 0.00 DEAL AMT: 143350.00

PF1 HELP PF2/4 RTN PF5 ENQ PF7/8 PAGE PF9 NOTE PF11 ---> PF12 QUIT

60


BDA screen shot of DLADJ in affected share

OPTN: DLADJ BCS/A: DEAL ADJUSTMENT FACILITY 21JAN16 15:14:16


ACTION IND: A ACCOUNT CODE: 110817 ACC. TYPE : C ADJ.ACC...: 40030

ACCOUNT NAME: POST WRG MIN.CHG.CDE: BKGE.PCNT.: 100

INSTR..: E HCI 0 SETTLE YYWW: 0000 SETTL-DTE: 20160122

NAME...: CHG.STR.CDE: __ TRADE-CAP.: _

DEAL ID: 1151 P/S: _ DATE: 20160118 DL.GRP.ID.: _______

CHANGE ACCOUNT CODE.: _______ TYPE: __


_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

CHARGES:

NEG.COM: __________________ IND: _ SCALE: ___


CONSID: CHARGES: DEAL AMT:

PF1 HELP PF2/4 RTN PF5 ENQ PF6 SWOP PF7/8 PAGE PF9 NOTE PF11 ---> PF12 QUIT

61


BDA screen shot of DLADJ in an unaffected share

OPTN: DLADJ BCS/A: DEAL ADJUSTMENT FACILITY 21JAN16 15:15:44

ACTN: SI 592

ACTION IND: A ACCOUNT CODE: 110817 ACC. TYPE : C ADJ.ACC...: 40030

ACCOUNT NAME: POST WRG MIN.CHG.CDE: BKGE.PCNT.: 100

INSTR..: E DST 0 SETTLE YYWW: 0000 SETTL-DTE: 20160122

NAME...: DISTELL CHG.STR.CDE: O1 TRADE-CAP.: A

DEAL ID: 1150 P/S: S DATE: 20160118 DL.GRP.ID.: _______

CHANGE ACCOUNT CODE.: _______ TYPE: __


T T6FnDhZJK6 99 300- 16247.00 48741.00-

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

_ __________ __ ____________ _ __________ _________________ _______ ________ _

CHARGES: BAS BRO INS SET VAT

30.00 243.71 .10 11.58 39.95

NEG.COM: IND: S SCALE: AAP


CONSID: 48741.00- CHARGES: 325.34 DEAL AMT: 48415.66-

PF1 HELP PF2/4 RTN PF5 ENQ PF6 SWOP PF7/8 PAGE PF9 NOTE PF11 ---> PF12 QUIT

62


BDA screen shot of NXTAL in affected share

OPTN: NXTAL NEXT-DAY DEAL ALLOCATIONS SELECTION CRITERIA 21JAN16 15:19:59


ALLOCATION ACCOUNT : 40030

INSTRUMENT ALPHA : HCI

PURCHASES/SALES (P/S) : P

PRINCIPLE/AGENT (P/A) :

RING-FENCED TERM :

RAND INDICATOR (Y/blank) :

PF1 HELP PF2 RETURN PF4 MAIN MENU PF12 QUIT

63


BDA screen shot of DLXOP in affected share

OPTN: DLXOP BCS/A: EXCEPTIONAL OPENINGS 21JAN16 15:21:37


ACTION IND: M ACCOUNT CODE: 2345684 ACC. TYPE : C

ACCOUNT NAME: ENTITLEME MIN.CHG.CDE: A BKGE.PCNT.: 100

INSTR..: E HCI 0 SETTLE YYWW: 0

NAME...: HCI CHG.STR.CDE: NC BRK.DEST.: ___

DEAL ID: _______ P/S: S DATE: 20160118

REFERENCE: ______

R PAGE LN QTY TERMS RI

_ 1 01 2500 ________ _

_ __________ __ ____________ ________ _

_ __________ __ ____________ ________ _

_ __________ __ ____________ ________ _

_ __________ __ ____________ ________ _

_ __________ __ ____________ ________ _

_ __________ __ ____________ ________ _

_ __________ __ ____________ ________ _

PF.COST:

DEAL AMT:

PF1 HELP PF2/4 RTN PF5 ENQ PF7/8 PAGE PF11 ---> PF12 QUIT

64


Step 6 Terminating and non-terminating trades identified by BDA (BDA0010)

65


What is considered as sales:

On-market DvP – Main Board including DLPREs and DLADJ

Corporate Actions (Deals create from CA events (DE & DG) will be treated as Main

Board for calculation purposes – deliver out

On-market DvP – Report Only including DLPREs and DLADJ

DLXOP – deliver out

Collateral out - deliver out

SLB – as lender – deliver out

Terminating Trades

Sales

66


What is considered as purchases -

On-market RvP – Main Board including DLPREs and DLADJ

On-market RvP – Report Only including DLPREs and DLADJ

Corporate Actions – receive in

DLXOP – receive in

Collateral returns – receive in

SLB – as borrower – receive in

Terminating Trades

Purchases

67


Priority – ECS to get a Terminating Purchase to allow for fails management –

Terminating Purchase least impact to the market

2nd Place – With choosing a Purchase which is non-terminating, we are looking

for a purchase that will have the least impact to the market should it be chosen

for fails – participants can claim for losses

What are we trying to achieve

68


With calculating if a Purchase is terminating or non-terminating – we have to

look at all transactions on an account/accounts (proprietary) – which are due

for settlement over a period of time –

the next 2 days (this includes transactions settling on that day (S) plus transactions

sitting on T+2 and T+1)

This does not include trades and allocations done for trade date for the current day

i.e. we are looking for trades before T

What are we trying to achieve (cont)

69


Fails management can be done any time after 16h00 on T+2.

The BDA0010 will include the settlement date that ECS has a problem

instrument for – BDA must use this date for the calculations

When

70


Where ECS sends an ECS0034 to BDA for settlement on the same day (T+3) –

BDA must:

If purchases settled – include dematerialised holdings as part of the calculation

If purchases unsettled – include in terminating transaction calculation

Any purchases still open on BDA after settlement date will be treated as

dematerialised as part of the calculations

Include any unsettled DLXOPs/SLB returns/collateral returns after their

settlement date, in the calculations

When

71


Where ECS sends an ECS0034 to BDA for settlement on the next day (T+2)

– BDA must:

If purchases settled for T+3 – include dematerialised holdings as part of the

calculation

If purchases unsettled for T+3 – do not include in the calculations as these may

be part of a failed trade for the current day – this will be handled as a business

process to sort out T+3 fails before going to T+2 for the same instrument

Any purchases still open on BDA after settlement date will be treated as

dematerialised as part of the calculations

Unsettled DLXOPs/SLB returns/collateral returns after their settlement date must

also be included in the calculations

When (cont)

72


Before you can work out if a purchase is terminating you need to calculate coverage

of sales – securities due to the account

The sequence of working out coverage of sales is as follows:

Dematerialised holding – does the account/broker have demat holdings excluding any

pledges, then

Securities Lending & Borrowing - account/broker has done a SLB which is reflected on BDA

settling on or before the settlement of the sale/s, then

Corporate Action entitlements - due to the account settling on or before the settlement of

the sale/s, then

Collateral returns (receive in), then

DLXOP – receipts settling on or before the settlement of the sale/s, then

Calculations - Sales

73


Report Only purchases – settling on or before the settlement of the sale/s which is has

not been used for another sale/s - i.e. sales must be summed up, then

Main Board purchases – settling on or before the settlement of the sale which is has not

been used for another sale.

Note: The sequence of applying the securities would be in descending order of quantity

Calculations - Sales (cont)

74


The results:

Terminating Purchases

Main Board purchases linked to:

Main Board sales

Report Only sales

DLXOP sales

Corporate Action sales

Collateral Out

Lending Out

75


Step 7 BDA 0010 sent to ECS

76


Step 8 Trade is Rolled or Failed

ECS0031 (Rolling of Settlement)

or

ECS0032 (Failed Trade)

message sent to BDA

77


Step 9 Appropriate BDA transactions are generated

78


New Accounts in BDA and ECS

Rolling of Settlement

40981 Rolling of Settlement

40984 Rolling of Settlement – Proprietary Suspense

Failed Trades

40982 Failed Trades

40985 Failed Trades – Proprietary Suspense

79



Defaulting Broker

and

Non-Defaulting Broker (Non-Controlled)

80


Rolling of Settlement (Non-Controlled)

The defaulting member has Compulsory Reverse Substitution (CRS) applied to a Non-Controlled

client and the deal is put into the defaulting member’s Reverse Substitution Account (40980). After

CRS has run, Failed Trades Management Procedures (FTMP) will be executed.

ECS will send an ECS0034 message to BDA requesting Terminating Trades

BDA will provide all Terminating Trades to ECS via the BDA0010 message which ECS will use to

initiate the Rolling of Settlement (RoS) or Failed Trades (FT) process

Once this process has been completed, ECS will generate an ECS0035 message which BDA will

receive indicating the Failed Trades Management Process for the selected ISIN has been closed

81



Defaulting Member after CRS

After CRS, the defaulting member will have:

a sale of 1000 AAA @ R1.00 at a consideration value of R1000.00 in the Reverse Substitution Account 40980 and

a purchase of 1000 AAA @ R1.00 at the consideration value of R1000.00 on the Proprietary Netting Account 40360

Non-Defaulting Member before RoS

The non-defaulting member’s Non-Controlled client has an original purchase of 1500 AAA @ R1.10 at a consideration value of R1650.00 and charges of R150.00 with a Settlement value of R1800.00

the Non-Controlled Substitution Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00

the GL Charges Accounts will have sale charges of R150.00

The Proprietary Netting Account has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00.

83



If Clearing and Settlement are unable to do SLBs, RoS will be initiated with the selection of non-defaulting deals.

On receipt of the RoS request by BDA, the following will take place:

Non-Defaulting Member Contra Deal Cancel

01 – The Non-Controlled Client Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and an order cancel is sent to Strate. The RoS Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Non-Controlled account.

02 – The GL Charges Accounts will have purchase charges of R150.00 from the Non-Controlled account.

03 - The Non-Controlled Substitution Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the Non-Controlled account.

04 – The Proprietary Netting Account will have a sale entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account and a cancel order is sent to Strate.

85



Non-Defaulting Member RoS Suspense Deal

05 – The RoS Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and the Proprietary Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and an order is sent to Strate.

Defaulting Member RoS Suspense Deal

06 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and an order is sent to Strate and the RoS Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00.

87



Defaulting Future RoS Settlement Deal

07 – The RoS Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and the Proprietary Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00.

Non-Defaulting Future RoS Settlement Deal

08 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and the RoS Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00.

89



Non-Defaulting Future Settlement Deal

09 – The RoS Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00. The Non-Controlled Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account and an order is sent to Strate.

10 – The Proprietary Netting Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account.


12 - The GL Charges Accounts will have sale charges of R150.00 from the Non-Controlled account.

91


Rolling of Settlement – Corporate Actions

Defaulting Broker

and


92


Rolling of Settlement – Corporate Actions (Non-Controlled)

The defaulting member has Compulsory Reverse Substitution (CRS) applied to a Controlled or Non-Controlled client and the deal is put into the defaulting member’s Reverse Substitution Account (40980). After CRS has run, Failed Trades Management Procedures (FTMP) will be executed if required.


BDA will provide all Terminating Trades to ECS via the BDA0010 message which ECS will use to initiate the Rolling of Settlement (RoS) or Failed Trades (FT) process

Once this process has been completed, ECS will generate an ECS0035 message which BDA will receive indicating the Failed Trades Management Process for the selected ISIN has been closed

During this RoS scenario, there is a Corporate Action (CA) that takes place (a Name Change (NC)). This will be applied to the future dated deals.

93




After CRS, the defaulting member has:

a sale of 1000 AAA @ R1.00 with a consideration value of R1000.00 in the Reverse Substitution Account

a purchase of 1000 AAA @ R1.00 with a consideration value of R1000.00 in the Proprietary Netting Account


The non-defaulting member’s Non-Controlled client has an original purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a settlement order was sent to Strate


the GL Charges Accounts will have a sale charge of R150.00.

The Proprietary Netting Account has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00.

95


Rolling of Settlement – Corporate Actions (Non-Controlled) If Clearing and Settlement are unable to do SLBs, RoS will be initiated with the selection of non-defaulting deals.

Non-Defaulting Member Contra Deal Cancel 01 – The Non-Controlled Client Account will have a sale of 1500 AAA @ R1.10 with a consideration value

of R1650.00 and charges of R150.00 and a cancel order is sent to Strate. The RoS Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Non-Controlled account.

02 – The GL Charges Accounts will have purchase charges of R150.00 from the Non-Controlled account. 03 - The Non-Controlled Substitution Account will have a purchase entry of 1500 AAA @ R1.10 with a

consideration value of R1650.00 and charges of R150.00 from the Non-Controlled account. 04 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of

R1650.00 and charges of R150.00 from the RoS Account and a cancel order is sent to Strate.

97







99




07 – The RoS Account will have a sale of 1500 BBB @ R1.10 with a consideration value of R1650.00 and the Proprietary Netting Account will have a purchase of 1500 BBB @ R1.10 with a consideration value of R1650.00.


08 – The Proprietary Netting Account will have a sale of 1500 BBB @ R1.10 with a consideration value of R1650.00 and the RoS Account will have a purchase of 1500 BBB @ R1.10 with a consideration value of R1650.00.

101




09 – The RoS Account will have a sale of 1500 BBB @ R1.10 with a consideration value of R1650.00. The Non-Controlled Account will have a purchase entry of 1500 BBB @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account and an order is sent to Strate entry.

10 – The Proprietary Netting Account will have a purchase of 1500 BBB @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account.

11 - The Non-Controlled Substitution Account will have a purchase of 1500 BBB @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the Non-Controlled account.


103



Defaulting Broker

and

Non-Defaulting Broker (Controlled)

104


Rolling of Settlement (Controlled)





105




After CRS, the defaulting member has




The non-defaulting member’s Controlled client has an original purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00

the Controlled Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00

the GL Charges Accounts will have a sale charge of R150.00

The Proprietary Netting Account has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00.

107




On receipt of the RoS request (BDA), the following will take place. The headings are nodes on the RoS message:-

Non-Defaulting Member Contra Deal

01 – The Controlled Client Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00. The RoS Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account.

02 – The GL Charges Accounts will have purchase charges of R150.00 from the Controlled account.

03 - The Controlled Netting Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account and an order is sent to Strate. .

04 – The Proprietary Netting Account will have a sale entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the RoS Account and a settlement order is sent to Strate.

109







111







113




09 – The RoS Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00. The Controlled Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account.

10 – The Proprietary Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the RoS Account.

11 - The Controlled Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account.

12 - The GL Charges Accounts will have sale charges of R150.00 from the Controlled account.

115


Rolling of Settlement – Corporate Actions

Defaulting Broker

and


116


Rolling of Settlement – Corporate Actions (Controlled)





During this RoS scenario, there is a Corporate Action (CA) that takes place (a Name Change (NC)) and this will be applied to the future dated deals.

117








The non-defaulting member’s Controlled client has an original purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a settlement order was sent to Strate



The Proprietary Netting Account has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00.

119






01 – The Controlled Client Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00. The RoS Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account.


03 - The Controlled Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the Controlled account and a settlement order is sent to Strate.

04 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the RoS Account and a settlement order is sent to Strate.

121







123







125




09 – The RoS Account will have a sale of 1500 BBB @ R1.10 with a consideration value of R1650.00. The Controlled Account will have a purchase entry of 1500 BBB @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the RoS Account.

10 – The Proprietary Netting Account will have a purchase entry of 1500 BBB @ R1.10 with a consideration value of R1650.00 from the RoS Account.

11 - The Controlled Netting Account will have a purchase entry of 1500 BBB @ R1.10 with a consideration value of R1650.00 from the Controlled account.


127



Defaulting Broker

and

Non-Defaulting Broker (Proprietary)

128


Rolling of Settlement (Proprietary)

The defaulting member has Compulsory Reverse Substitution (CRS) applied to a Non-Controlled client and the deal is put into the defaulting member’s Reverse Substitution Account (40980). After CRS has run, Failed Trades Management Procedures (FTMP) will be executed.




129



Defaulting Member

The defaulting member has

a sale of 700 AAA @ R1.00 with a consideration value of R700.00 in the Stock Account



The non-defaulting member’s Proprietary Accounts A and B have purchases which will be used for Rolling of Settlement in this example. Proprietary can be made up of 1 or more account’s to satisfy the defaulting member’s short. The BDA0010 for Proprietary Accounts is made up of an accumulation of deals with offsets done for ECS.

Proprietary Account A has a ‘offset’ value original purchase of 200 AAA @ R1.10 with a consideration value of R220.00 and Proprietary Account B has a ‘offset’ value original purchase of 500 AAA @ R1.10 with a consideration value of R550.00. The Proprietary Netting Account has a purchase of 700 AAA @ R1.10 with a consideration value of R770.00.

131






01 – The RoS Proprietary Suspense Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00. This is an accumulation of Proprietary Accounts A and B. The RoS Account will have a purchase entry of 700 AAA @ R1.10 with a consideration value of R770.00 from RoS Proprietary Suspense Account.

02 – The Proprietary Netting Account will have a purchase of 700 AAA @ R1.10 with a consideration value of R770.00 from the RoS Proprietary Suspense Account and an order is sent to Strate.

03 – The Proprietary Netting Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00 from the RoS Account and an order is sent to Strate.

133







135







137




08 – The RoS Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00. The RoS Proprietary Suspense Account will have a purchase entry of 700 AAA @ R1.10 with a consideration value of R770.00 from the RoS Account.

09 – The Proprietary Netting Account will have a purchase entry of 700 AAA @ R1.10 with a consideration value of R770.00 from the RoS Account.

10 – The Proprietary Netting Account will have a sale entry of 700 AAA @ R1.10 with a consideration value of R770.00 from the RoS Proprietary Suspense Account.

139


Rolling of Settlement - Corporate Actions

Defaulting Broker

and


140


Rolling of Settlement - Corporate Actions (Proprietary) The defaulting member has a purchase in a Proprietary Account that will not be met. Failed Trades Management Procedures (FTMP) will be executed if required.

ECS will send an ECS0034 message to BDA requesting Terminating Trades. BDA will provide all Terminating Trades to ECS via the BDA0010 message which ECS will use to initiate the Rolling of Settlement (RoS) or Failed Trades (FT) process. Once this process has been completed, ECS will generate an ECS0035 message which BDA will receive indicating the Failed Trades Management Process for the selected ISIN has been closed.

During this RoS scenario, there is a Corporate Action (CA) that takes place (a Name Change (NC)) and this will be applied to the future dated deals.

141


Rolling of Settlement - Corporate Actions (Proprietary)

Defaulting Member





The non-defaulting member’s Proprietary Accounts A and B have purchases which will be used for Rolling of Settlement in this example. Proprietary can be made up of 1 or more account’s to satisfy the defaulting member’s short.

The BDA0010 for Proprietary Accounts is made up of an accumulation of deals with offsets done for ECS.

Proprietary Account A has a ‘offset’ value original purchase of 200 AAA @ R1.10 with a consideration value of R220.00 and Proprietary Account B has a ‘offset’ value original purchase of 500 AAA @ R1.10 with a consideration value of R550.00. The Proprietary Netting Account has a purchase of 700 AAA @ R1.10 with a consideration value of R770.00.

143



If Clearing and Settlement are unable to do SLBs, RoS will be initiated with the selection of non defaulting deals.



01 – The RoS Proprietary Suspense Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00. This is an accumulation of Proprietary Accounts A and B. The RoS Account will have a purchase of 700 AAA @ R1.10 with a consideration value of R770.00 from RoS Proprietary Suspense Account.

02 – The Proprietary Netting Account will have a purchase of 700 AAA @ R1.10 with a consideration value of R770.00from the RoS Proprietary Suspense Account and an order is sent to Strate.

03 – The Proprietary Netting Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00 from the RoS Account and an order is sent to Strate.

145







147







149




08 – The RoS Account will have a sale of 700 BBB @ R1.10 with a consideration value of R770.00. The RoS Proprietary Suspense Account will have a purchase entry of 700 BBB @ R1.10 with a consideration value of R770.00 from the RoS Account.

09 – The Proprietary Netting Account will have a purchase entry of 700 BBB @ R1.10 with a consideration value of R770.00 from the RoS Account.

10 – The Proprietary Netting Account will have a sale entry of 700 BBB @ R1.10 with a consideration value of R770.00 entry from the RoS Proprietary Suspense Account.

151


Cancelled and new contract notes are generated and distributed as appropriate

XML

SWIFT

OMGEO

152


OR

Trade is failed with a retransaction or compensation

NOTE: Retransaction entries will be shown, however compensation with be processed manually

153


Failed Trade

Defaulting Broker

and


154


Failed Trade (Non-Controlled)





155







Non-Defaulting Member before Failed Trade

The non-defaulting member’s Non-Controlled client has an original purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a settlement order was sent to Strate



The Proprietary Netting Account has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00

157



If Clearing and Settlement are unable to do SLBs or RoS, a Failed Trade will be initiated with the selection of non-defaulting deals.

On receipt of the Failed Trade request (BDA), the following will take place. The headings are nodes on the Failed Trade message:-

Non-Defaulting Member Contra Deal Cancel

01 – The Non-Controlled Client Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a cancel order is sent to Strate. The Failed Trade Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Non-Controlled account.

02 – The GL Charges Accounts will have purchase charges of R150.00 from the Non-Controlled account.


04 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the Failed Trade Account and a cancel order is sent to Strate.

159



Non-Defaulting Member Failed Trade Suspense Deal

05 – The Failed Trade Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and the Proprietary Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and an order is sent to Strate.

Defaulting Member Failed Trade Suspense Deal

06 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and an order is sent to Strate and the Failed Trade Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00.

161


Failed Trade - Retransaction

Defaulting Broker

and


162


Failed Trade - Retransaction (Non-Controlled)

The non-defaulting member/s will do market replacement deal/s for the client/s that were involved in the Failed Trade (FT) that would have occurred previously

Once all the members have purchased (Market Replacement), ECS will issue BDA with a Re-Transaction message to re-transact from the members FT Account back to the clients

Non-Defaulting Member before Re-Transaction

The non-defaulting member would have done

a Market Replacement purchase for his client/s into the FT Account, a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and a settlement order was sent to Strate

the Proprietary Netting Account has a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00.

On receipt of the Re-Transaction request (BDA), the following will take place. The headings are nodes on the Re-Transaction message:-

164


Failed Trade - Retransaction (Non-Controlled)


01 – The FT Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00. The Non-Controlled Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 and an order is sent to Strate.

02 – The Proprietary Netting Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the FT Account.

03 - The Non-Controlled Substitution Account will have a sale entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the Non-Controlled account.


166


Failed Trade

Defaulting Broker

and


167


Failed Trade (Controlled)





168


Failed Trade (Controlled) Defaulting Member after CRS





The non-defaulting member’s Controlled client has an original purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00



The Proprietary Netting Account has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00

170






01 – The Controlled Client Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00. The Failed Trade Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account.


03 - The Controlled Netting Account will have a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account and a cancel order is sent to Strate.

04 – The Proprietary Netting Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Failed Trade Account and a settlement order is sent to Strate.

172







174



Defaulting Broker

and


175


Failed Trade - Retransaction (Controlled)

• The non-defaulting member will do a market replacement deal for the client that was involved in the Failed Trade that would have occurred previously

• Once the member has purchased (Market Replacement) the shares, ECS will issue BDA with a Re-Transaction message to re-transact from the members books back to the clients


The non-defaulting member would have done a Market Replacement purchase for his client/s into the Failed Trade (FT) Account, the Controlled client has a purchase of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00

the Proprietary Netting Account has a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00


177


Failed Trade - Retransaction (Controlled)


01 – The FT Account will have a sale of 1500 AAA @ R1.10 with a consideration value of R1650.00. The Controlled Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 and charges of R150.00 from the FT Account and an order is sent to Strate.

02 – The Proprietary Netting Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the FT Account.

03 - The Controlled Netting Account will have a purchase entry of 1500 AAA @ R1.10 with a consideration value of R1650.00 from the Controlled account.


179


Failed Trade

Defaulting Broker

and


180


Failed Trade (Proprietary)

The defaulting member has purchase in a Proprietary Account that will not be met. Failed Trades Management Procedures (FTMP) will be executed if required.



Once this process has been completed, ECS will generate an ECS0035 message which BDA will receive indicating the Failed Trades Management Process for the selected ISIN has been closed.

181



Defaulting Member





The non-defaulting member’s Proprietary Accounts A and B have purchases which will be used for a Failed Trade in this example. Proprietary can be made up of 1 or more account’s to satisfy the defaulting member’s short. The BDA0010 for Proprietary Accounts is made up of an accumulation of deals with offsets done for ECS.

Proprietary Account A has a ‘offset’ value original purchase of 200 AAA @ R1.10 with a consideration value of R220.00

Proprietary Account B has a ‘offset’ value original purchase of 500 AAA @ R1.10 with a consideration value of R550.00

The Proprietary Netting Account has a purchase of 700 AAA @ R1.10 with a consideration value of R770.00

183






01 – The Failed Trade Proprietary Suspense Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00. This is an accumulation of Proprietary Accounts A and B. The Failed Trade Account will have a purchase entry of 700 AAA @ R1.10 with a consideration value of R770.00 from Failed Trade Proprietary Suspense Account.

02 – The Proprietary Netting Account will have a purchase of 700 AAA @ R1.10 with a consideration value of R770.00 and an order is sent to Strate from the Failed Trade Proprietary Suspense Account.

03 – The Proprietary Netting Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00 from the Failed Trade Account and an order is sent to Strate.

185







187



Defaulting Broker

and


188


Failed Trade - Retransaction (Proprietary)

The non-defaulting member/s will do market replacement deal/s for the proprietary account/s that were involved in the Failed Trade (FT) that would have occurred previously. Once all the members have purchased (Market Replacement), ECS will issue BDA with a Re-Transaction message to re-transact from the member FT Account back to the proprietary accounts.


The non-defaulting member would have done a Market Replacement purchase for his proprietary accounts into the FT Account, a purchase of 700 AAA @ R1.10 with a consideration value of R7700.00.


190


Failed Trade - Retransaction (Proprietary)


01 – The FT Account will have a sale of 700 AAA @ R1.10 with a consideration value of R770.00. The FT Proprietary Suspense will have a purchase of 700 AAA @ R1.10 with a consideration value of R770.00.

02 – The Proprietary Netting Account will have a purchase entry of 700 AAA @ R1.10 with a consideration value of R770.00 from the FT Account.

03 – The Proprietary Netting Account will have a sale entry of 700 AAA @ R1.10 with a consideration value of R770.00 from the FT Proprietary Suspense.

192


Cancelled and new contract notes are generated and distributed as appropriate

XML

SWIFT

OMGEO

193


Intervention over!

Step 10 ECS 0035 sent to BDA

Step 11 All BDA screens previously suspended for the affected share are activated

194

Agenda


• Migration Schedule Overview

• Overview of the migration week schedule (Week before and Week after)

• Other Functionality

• Testing Process Overview

195

Migration

W T F M T W T F M T

T T+1 T+2 C T+3 T+4 T+5

T T+1 O T+2 T+3 T+4 T+5

T N T+1 T+2 T+3 T+4 T+5

V T T+1 T+2 T+3 CA

E T T+1 T+2 T+3 CA

R T T+1 T+2 T+3

S T T+1 T+2 T+3

I T T+1 T+2

O

N LDT RD/RD PD/PD

196

Migration Assumptions

• Limit amount of Corporate Actions (including IPO’s/private placements) if

possible

• Move to a RD-3 LDT date – no LDT on Friday of conversion

• Jobbing across settlement days – warn members about SLBs and funding

for a period of time

• Resources will be available across the market for 2 weeks after go-live to

manage issues

• Migration will not take place over a month-end

• Migration will not take place over a futures close-out

• Migration will not take place over a financial year-end

197

Agenda




• New Status Intimations / Spreadsheets & Fractions / Freezing of Registers


198

New status intimations

• New MT 548 - Reasons for non-commits

• No securities

• No clients instructions

• Timings:

• EOD T;

• Real-time T+1; and

• Real-time T+2.

199

Fractions and spreadsheets

• Raised in 2009

• Recently approved at CSDP Forum

• Investigating implementing before T+3 Phase III

• Preferred option as previously agreed

• VWAP on LDT+1 less 10% (for market movements) used for fraction payment;

• JSE to announce rate so everyone uses same rate; and

• Surplus shares sold by participant / broker to cover pay out.

• Spreadsheets will remain for

• IPO’s;

• Excess Take Up; and

• Dual listed companies where home Exchanges regulations prevail.

200

New status intimations cont..

201

New status intimations cont..

202

Freezing of registers

• Dual Listed companies

• Freeze registers once currency conversion is booked – aligned to JSEs Listing

Requirements

• Securities can’t move between registers – creates settlement problems

• Change – currency conversion on LDT-1 and announcement to the market

203

Agenda





204

T+3 Update Timeline

204

Phase 3

2015 2016

Jun

May

Ap

r

Mar

Feb

Jan

Dec

No

v

Oct

Sept

Au

g

Jul

Jun

May

Ap

r

Mar

Feb

Jan

Jul

UAT Cycles

1 & 2

30/03 – 26/05 R

eg

res

sio

n C

yc

le

07

/09

– 1

8/0

9

SIT Cycles 1 to 6

01/10 – 26/03

Co

de

Fre

eze

26

/05

– 0

1/0

6

SIT

En

viro

nm

en

t pre

p

21

/09

– 3

0/0

9

SYT (9 iterations) 10 Dec 2014 – 2 Sep 2015

GO

-LIVE W

IND

OW

(2

5-Ju

ne to

23

-July)

We are here

205

System Integration Testing Graphical Task Overview

206

T+3 Update Testing – market involvement

• Timing of phases:

• Required participation per phase:

• Pre-SIT Activities

• Initial reference data set-up

• Test pack review

• Per test cycle:

• Reference data review and health check (two days prior to test execution)

• Test pack refinement

• Test execution

• Results audit (2 days post test execution)

• Environment refresh (2 days prior to the next test phase)

SIT – Cycle 3

Scheduled to start end Nov 2015

CSDPs (Voluntary)

SIT – Cycle 4

Scheduled to start mid Jan 2015

CSDPs (Compulsory)

SIT – Cycle 5

Scheduled to start beginning Feb 2016

CSDPs (Compulsory) /

Members (Voluntary)

UAT – Cycle 1

Scheduled to start end March 2016

CSDPs & Members (Compulsory)

UAT – Cycle 2

Scheduled to start end Apr 2016

CSDPs & Members (Compulsory)

SIT – Cycle 6

Scheduled to start beginning March

2016 CSDPs (Compulsory)

/ Members

(Voluntary)

207

Entry and Exit Criteria System Integration Testing

Entry-Criteria

• Market documentation reviewed and signed off

• Agreed and signed off test packs

• Internal and external stakeholders

• Market Test Plan completed, reviewed and signed off

• Data aligned across applications and all relevant backups are completed

• Internal and external stakeholders

• Infrastructure verification tests complete (including configuration and connectivity)

• Applications and services are operational in the test environment across all applications – Participants to manage internally

• No defects with severity of critical or high are open from previous phase

• Deviation could occur under the following circumstances

• The defect does not affect any key component within your application

• The Project team in conjunction with the affected market participant agree to continue with state of defect

208

Entry and Exit Criteria System Integration Testing

Exit-Criteria

• All test procedures for a cycle is successfully executed by each market participant

• Test results recorded in the agreed test management tool – Participants to manage internally

• Screen shots, printouts, actual result, etc. attached to the test case in the test management tool -

Participants to manage internally

• Approval for all test cases that are not executed i.e. deferred or not applicable is

quality assured by the Test Manager

• All defects with severity of critical and high is fixed and retested during the cycle

• Cycle will be extended, if required, to meet the above – Will be agreed by the market

• Agreed resolution of all medium and low severity defects

• Pass rate is greater than equal to a specified percentage

• Pass rate is measured across all applications involved in the cycle

Questions?

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