Clearing, Settlement and Central Securities Depository Operations
This domain tests how executed JSE equities trades become settled securities and cash movements. It covers clearing, central counterparty risk, Strate CSD records, CSDP functions and the T+3 settlement cycle.
Core rules and concepts
- JSE Clear acts as central counterparty for eligible trades, interposing itself between buyer and seller and managing margin and default risk.
- Strate is the central securities depository; settlement is electronic and delivery-versus-payment based.
- A CSDP maintains participant-level custody records and instructs settlement in Strate on behalf of clients.
- South African equities settle on T+3, meaning the third business day after trade date, subject to market calendars.
- Fails, buy-ins and suspension procedures apply when a participant cannot deliver securities or cash on settlement date.
Worked example
A client buys 10,000 shares on Monday. T+3 settlement is Thursday, assuming no market holiday. The buying CSDP must have cash and the selling CSDP must have securities available for the Thursday settlement window. If the seller’s CSDP has a shortfall, the trade fails. The buying member cannot simply treat the shares as settled on Monday. It must monitor the fail, apply JSE Clear and Strate fail procedures, and keep the client informed. Any buy-in or compensation follows the applicable rules, not ad hoc negotiation.
Traps that cost marks
- Counting trade date as settlement day one.
- Confusing JSE Clear’s clearing role with Strate’s CSD record-keeping role.
- Assuming a CSDP can settle without available cash or securities.
- Ignoring business-day calendars and market holidays.
Exam focus
Expect date calculations, role identification and fail-handling scenarios.