ETP – Settlement Model
December 2016
www.strate.co.za
©Strate
Agenda
 ETP – Settlement Model – Key Principles
 ETP Settlement Flow
 ETP Settlement Model – Securities Exception Handling
 ETP Settlement Model – Cash Exception Handling
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ETP – Settlement Model – Key Principles

Locked-in Trades from ETP on a Gross Basis.

Strate will also receive Trades for the existing BMA and OTC Markets on a
Gross Basis.

ETP Trades can be linked via Back-to-Back function to create efficiency in
settlement. The dependant trade from the BMA or OTC Market will settle
first and be final before ETP trade settles. The Strate settlement system
enables multiple settlement runs on Settlement Day commencing from 10:00
with the last run triggered at 15:15.

Cash Settlement in Central Bank Funds.

SFIDvP (Simultaneous Final Irrevocable Delivery Versus Payment).
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ETP – Settlement Flow
7. Client
Instruction
6. Settlement
Allegement
4a
8.
7a
15
14. Payment
Confirmation
CSDP 1
/
Settling
Bank 1
CSD
10
11. Payment
Instruction
Commit /
Back to Back Links
9. Status
Intimation (RDS)
10. Payment Advice
17. Status Intimation
Intimation (STL)
Trade
Quotes
3.
Trade
Confirmation
6. Settlement
Allegement
8. Commit /
Back to Back Links
9. Status
Intimation (RDS)
10. Payment Advice
17. Status Intimation
Intimation (STL)
12. Payment Instruction
13
16. Payment Confirmation
ETP
Member 2
(Buy)
SAMOS
(CBPL)
16. Payment Confirmation
7. Client
Instruction
Trade
Confirmation
1.
17. Status Intimation
Intimation (STL)
ETP
(MTS)
5. Status Intimation
Intimation (MTCH)
3.
Trade
Quotes
4. Locked-in
Trades
ETP
Member 1
(Sell)
2
1.
CSDP 2
/
Settling
Bank 2
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ETP – Settlement Flow (Contd.)
1. ETP Members to provide quotes.
2. ETP Matches the trades reported by ETP members.
NOTE: Naked/Short sales are not permitted in the ETP market or the OTC market. Member may have to warehouse
stock to cover potential shorts on ETP
3. A trade confirmation will be provided to the ETP Members.
4. ETP will provide the Locked-in Trades in agreed format to Strate’s Bonds system.
4a. Strate’s Bonds systems matches the trade legs using the locked-in reference as well as cross validate the salient
trade details.
5. Strate’s Bonds system to notify the ETP with a matched status.
6. Strate will notify the respective CSD Participants using a Settlement Allegement (MT586) message.
7. ETP Member will provide the Client Instruction to their respective CSD Participant.
7a. The CSD Participant will match the Client Instruction to the Settlement Allegement. If the matching is successful,
the CSD Participant will check for requisite security positions or cash depending on the type of transaction.
8. If security holdings / cash is available then the CSD Participant will generate a commit (MT598-101) message to
Strate.
9. Once both the trade legs are committed, Strate Bonds system will notify that the trade legs are in “Ready for
Settlement” status to both the CSD Participant and ETP.
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ETP – Settlement Flow (Contd.)
10. As part of the settlement run, Strate Bond’s system will reserve the securities on a seller’s account and cash will be
optimized in all the runs. Strate Bond’s system to generate Payment Advice (MT298-129) to each CSD Participant.
11. Strate Bond’s system to generate Payment Instructions (MT202) to SAMOS CBPL for cash settlement.
12. CSD Participant to notify its Settling Bank using a Payment Advice (MT298-129) message. Settling Banks to fund their
respective SAMOS CBPL Account using Payment Instructions (MT202).
13. SAMOS does the transfer of cash in the relevant CBPL accounts.
14. SAMOS to generate Payment Conformation (MT298-001) to Strate and respective Settling Banks.
15. Strate to “unreserve” the securities and transfer the securities to the respective buyer’s accounts.
16. SAMOS to generate Payment Confirmation (MT298-910) to Payee and Beneficiary Banks
17. Strate to notify ETP and CSD Participants that the trades have been settled successfully.
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ETP – Settlement Flow – Securities Exception Handling
Role of ETP Settlement Authority (SA)
1. ETP SA to monitor settlement of ETP Trades, by playing a facilitating role to ensure
settlement.
2. If the ETP Member does not enable CSD Participant to commit to the Trade Legs, ETP
SA will facilitate scrip lending transactions between NT and ETP Members.
3. Strate to facilitate a separate view of uncommitted transactions to the ETP SA and
reporting of scrip lending transactions to manage settlement.
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ETP – Settlement Flow – Securities Exception Handling (Contd.)
ETP SA
CSD
Settlement
Authority Access
3
2
Access to Security
Pool
ETP
Member
4. Settlement
Allegement
6.
Commit /
BTB Links
2a. Repo
Confirmation
7. Status
Intimation (RDS)
3a. Status Intimation
(MTCH)
7. Status Intimation
(RDS)
1. ETP Member
Approaches SA
NT
2a. Repo Trades
5. Client
Instruction
CSDP
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ETP – Settlement Flow – Securities Exception Handling (Contd.)
1. ETP Settlement Authority will be monitoring and managing ETP Trades for any contagion risk across these platforms. If issues are in
BMA – JSE Settlement Authority will manage as they currently do.
2. ETP Settlement Authority will monitor commits by CSDPs. Where the CSDP is unable to commit to the Settlement Allegements due
to lack of securities, ETP Settlement Authority will escalate to National Treasury/SARB and instruct the PD to book a SARB reverse repo.
2. The ETP Settlement Authority will only facilitate the SARB reverse repo and will not act as counterparty. National treasury/SARB will
face the ETP member directly as counterparty
2a. ETP Settlement Authority will instruct the ETP member to match the SARB reverse repo’s. ETP will generate Repo Trades with
Locked-in reference with the failing ETP Member to receive the requisite holdings.
3. Strate’s Bonds systems matches the repo legs using the locked-in reference as well as cross validate the salient trade details.
3a. Strate to notify the ETP Settlement Authority with a matched status.
4. Strate will notify the respective CSD Participants using a Settlement Allegement (MT586) message.
5. ETP Member will provide the Client Instruction to their respective CSD Participant.
6. The CSD Participant will match the Client Instruction to the Settlement Allegement. If the matching is successful, the CSD Participant
will check for requisite security positions or cash depending on the type of transaction. If security holdings / cash is available then the
CSD Participant will generate a commit (MT598-101) message to Strate.
7. Once both the trade legs are committed, Strate Bonds system will notify that the trade is in “Ready for Settlement” status
to both the CSD Participant and ETP Settlement Authority.
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ETP – Settlement Flow – Cash Exception Handling
Role of SARB
1. Settling Bank to approach SARB, if cash is not available to settle
ETP Trades.
2. If adequate Collateral is present in SAMOS, then SARB to provide
cash to the Settling Bank and facilitate settlement of cash
3. Settling Bank to post more Collateral as part of their SAMOS
Square-Off processes.
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ETP – Settlement Flow – Cash Exception Handling (Contd.)
Settlement
Authority Access
ETP
SA
8. Payment
Confirmation
11. Settlement
Confirmation
4. Payment
Advice
CSDP
2
1. Treasury Approach's
SARB for Cash
3
10. Status
Intimation (STL)
ETP
Member
SAMOS
(CBPL)
CSD
9
10. Status
Intimation (STL)
7
5. Payment
Advice
8. Payment
Confirmation
6. Payment
Instruction
Settling
Bank
Bank
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ETP – Settlement Flow – Cash Exception Handling (Contd.)
1. If the Settling Bank is unable to fund, then the Bank will approach SARB for cash.
2. SARB to provide cash to the Settling Bank if they have adequate collateral at SAMOS.
3. As part of the settlement run, Strate Bonds system will reserve the securities in seller’s account and cash will be
optimized in these runs.
4. CSD to send Payment Advice (MT298-129) to the relevant CSD Participant.
5. CSD Participant to notify its Settling Bank using a Payment Advice (MT298-129) message.
6. Strate Bond’s system to generate Payment Instructions (MT202) to SAMOS CBPL for cash settlement. The
payment instructions are linked to each other using a Payment Reference.
7. As soon as all Settling Banks have funded for their respective Payment Instructions, SAMOS does the transfer of
cash in the relevant CBPL accounts.
8. SAMOS to generate Payment Conformation (MT298-001) to Strate and respective Settling Banks.
9. Strate to “unreserve” the securities and transfer the securities to the respective buyer’s accounts.
10. Strate to notify ETP and CSD Participants that the trades have been settled successfully.
11. CSD Participant to notify the respective clients that the trades have been settled successfully in their systems.
www.strate.co.za
©Strate