Sub-custody arrangements have been kept fairly standard over the past year. There have been changes in the rules of South Africa’s CSD, Strate, Financial Markets Act (FMA) and Companies Act relating to the offering of segregated depository accounts SDA by the CSD. 

Regulation now allows for segregated securities accounts to be opened at CSD level. In the past, ownership of electronic securities was only regarded at sub-register level whereby now this is also allowed at electronic register level maintained by the CSD.

As of March 2015, the manual matching process for off-market transactions will be automated, with client instructions sent to the CSD once received from the client. The CSD will then look for a corresponding counterparty instruction and perform the matching process. If a matching order is not in place the CSD will inform the counterparty of a pending OTC trade alleged against a specific client’s account.

Substantial changes are envisaged for sub-custody in the next two years. The Johannesburg Stock Exchange is in the final phase of its T+3 project to move equities settlement from a T+5 to a T+3 settlement cycle. It is envisaged that the live date for the final phase of T+3 will be during the end of Q2 2016. 

The existing bond settlement and custody infrastructure used by the market has become inflexible and a new debt instrument solution (DIS) for bonds has been proposed using Swift messaging to communicate between the participants and the CSD (very similar to equities). The implementation date is still to be agreed, says Jean-Louis Bernardo, managing director of Societe Generale in Johannesburg.

“The South African market is built on a world class infrastructure and continues to focus on increased risk mitigation and market efficiency, this is evidenced by the infrastructure enhancements planned for bonds and money markets and the drive to achieve a T+3 settlement cycle for equities,” says Charl Bruyns, head of Standard Bank Investor Services, South Africa.