HIGH-LEVEL EQUITY MEMBERSHIP REQUIREMENTS

Transcription

1 HIGH-LEVEL EQUITY MEMBERSHIP REQUIREMENTS Membership Type An applicant for Equities Membership must apply for authorisation to perform the following regulated services with conditions as follows: Trading Services Provider (TSP) Authorised to perform Trading Services Custody Services Provider (CSP) Authorised to perform Custody Services Investment Services Provider (ISP) Authorised to perform Investment Services (Can only apply if already a TSP or applying to become a TSP) Membership Requirements To be admitted as a member and to remain a member, an applicant or a member, respectively, must be incorporated and registered as a domestic company under the Companies Act. Only appoint executive and non-executive directors who comply with the fit and proper requirements of rule Ensure that a shareholder who is a natural person and who directly or indirectly holds in excess of 10% of the issued shares of the applicant or member complies with the fit and proper requirements of rule 4.10 Appoint a compliance officer in terms of rule 4.30 who complies with the fit and proper requirements set out in rule Appoint a settlement officer and an alternate settlement officer in terms of rule 4.40 who comply with the fit and proper requirements set out in rule 4.10; Appoint a CSDP, unless it only performs, or intends to perform, custody services and it does not necessarily require a CSDP in order to perform such services. Specific Conditions of Membership The specific conditions of membership represent the minimum conditions which an applicant for membership and a member are required to satisfy in order to be granted and to retain membership and to be authorised to perform regulated services are: Resources, procedures and systems A member must employ adequate resources, procedures and systems necessary for the effective performance of the regulated services which the member provides and for ensuring compliance with the Act and the rules and directives that are relevant to the performance of such regulated services. A member must ensure that its employees are suitable, adequately trained and properly supervised JSE Limited Registration Number: 2005/022939/06 One Exchange Square, Gwen Lane, Sandown, South Africa. Private Bag X991174, Sandton, 2146, South Africa. Telephone: , Facsimile: , Member of the World Federation of Exchanges Executive Directors: RM Loubser (CEO), JH Burke, FM Evans NF Newton-King, LV Parsons Non-Executive Directors: HJ Borkum (Chairman), AD Botha, MR Johnston, DM Lawrence, W Luhabe, A Mazwai, NS Nematswerani, N Payne, G Serobe, Company Secretary: GC Clarke

2 A member must have a point of presence in the republic of South Africa. A member must register a shelf company with the domicile in the register of companies in South Africa. The JSE does not facilitate any remote membership Business activities The dominant business activity of a member must be the performance of regulated services in respect of JSE authorised investments. The scope of a member s business activities may also include the management of investments or provision of advice in relation to other financial products, subject to the member having been granted the appropriate license to conduct such activity in terms of the FAIS Act and to the limitations referred to in rule For the purpose of the rule , any activities which are not related to regulated services or services provided in terms of the FAIS Act, but which are not a regular feature of the member s business and are not held out by the member, in any communication with any person, to be part of the business activities of that member, will not be deemed to be part of the business activities of that member. JSE Membership Timelines The membership application period takes about +- 8 weeks to complete. This is highly dependent on your business model. The initial set up on the Network infrastructure Dependent on infrastructure services providers such as Telkom, Neotel, and MTN etc. The customer enablement configuration with the LSE takes about 7 working days whether you are going to go the Host-to-Host route or TALX ASP. JSE Back up stationary without a LOGO takes about 6 weeks. With no stationary, it takes about 2 weeks. BDA Set up takes about +- weeks Capital Requirements Fixed Expenditure Base Requirement The base requirement of a member is the higher of an amount determined in accordance with the directives as being adequate to meet a member's fixed expenditure for a period of 13 weeks or R Adjusted liquid capital A member must on admittance and at all times thereafter hold adjusted liquid capital which complies with the minimum requirements calculated in accordance with directive DC 2, sufficient to meet its base requirement and its risk requirement. Page 2 of 9

3 Banking Requirements Here are the minimum banking accounts that is required Trust Account - Used to segregate client funds and linked to JSET (JSE Trustees) Settlement Account - Used to ring-fence settlement funding obligations Business Account - Used for funding all other business expenses Outsourcing Requirements Directive FI A TSP may enter into an arrangement with another TSP (referred to as a settlement agent ) in terms of which the settlement agent assists the TSP in meeting its obligations to ensure the settlement of proprietary trades and trades executed on behalf of non-controlled clients. Directive FL Written agreement between a TSP and a CSP where a TSP does not meet the requirements of Directive FK but has controlled assets and therefore must outsource to another CSP in terms of Directive FL. Directive AM This directive applies when a provision is made by a member to perform accounting and administrative functions on behalf of another member. A member may not function as a host member unless its administration is, in the opinion of the Director: Surveillance, adequately staffed and being conducted in an expert and orderly manner with all requisite controls in place. Other Requirements Auditors A member shall appoint an auditor registered as an accountant and auditor under the Public Accountants and Auditors Act, 1991, who engages in public practice as contemplated in that Act. The appointment of the Auditor shall be conditional upon the approval of the appointee by the Director: Surveillance. In order to get approval for your audit partner the Auditor Questionnaire needs to be completed. Although certain audit partners may have received prior approval from the JSE it is still imperative that the Auditors Questionnaire be completed. In & Out Insurance All members shall be covered at all times by the In & Out Insurance. Internal Controls and Risk Management For membership purposes the JSE needs to know who will be responsible for developing and documenting the firm s internal control and risk management procedures and for maintaining the procedures manual. The JSE needs a list the proposed members of your Audit Committee and the intended frequency of meetings for that Committee. Page 3 of 9

4 SWIFT The approval of your SWIFT BIC code is an important factor which will determine your go-live dates as it is a membership requirement to be a swift participant before you are allowed to trade on the exchange. The startup costs are in the region of 5000 Euro and thereafter a subscription cost of around R (excluding vat) per month and message costs of R1.06 (Excluding Vat) per message (linked directly to number of trades/settlements). There is also an annual fee which should be less than R5000 per year. The annual fee is payable to SWIFT. SWIFT has a very rigid network control and can only add users during their monthly cut-over dates. There is an 8 week application/approval period. Please note that SWIFT will only process applications/updates through their website. SWIFT requires that all applicants must have a direct debit facility in place before they apply for SWIFT membership. You would have to arrange this with your local bank and confirm this facility is in place prior to applying for SWIFT membership. You have to complete the e-undertaking on SWIFT.com first before you do the direct debit. The link for this is thereafter SWIFT will provide the new Member with a User ID and Password in order for them to access the required application forms for online completion Trading In order to trade you need to connect to the London platform (TradElect) via the JSE network. You have 2 connectivity options to the JSE. The first option is to connect via a Host to Host solution. If this is your connectivity choice you will also have to pay an additional fee to the JSE for the TradElect API, which is R (Excl. VAT), which is payable monthly. If a member decides to connect via the Host to Host solution they will also have to pay an additional cost for the trading front-end, this is payable to their trading front-end service provider. The second option to connect would be via an ASP solution, whereby clients would connect to the JSE s public servers. Currently this service is only offered by the JSE through their trading front-end partners SunGard. The solution is called TALX. The cost for an ASP front-end is R (Excl. VAT) per month per terminal Once a member has chosen their trading solution they are then requested to apply for trader ID s. Trader ID s will only be created to all traders who have passed the JSE Traders exam which is written and administered through the SAIFM. If a member has passed their exam some time back, it is as the discretion of the JSE s Market Operations whether the individual would be required to rewrite their trader s exam. Submissions of the trader ID s activation form is forwarded to the JSE s Trading Services Department tradingservices@jse.co.za. Page 4 of 9

5 Technical You are required to have a minimum line bandwidth capacity of 1MB per 4 workstations as well as a backup line. The line should be sufficient for trading as well as your back office systems. The more workstations you have the bigger the line capacity needed. You must have a production and back up line to the JSE. The requirements may change with the introduction of the new back office system due to be released during the SRP (System Replacement Project) which is an initiative undertaken by the JSE currently. This system will replace the JSE s back office system called BDA (Broker Dealer Accounting). There are no definite timelines for SRP at this stage, tentative dates for release is BDA (Broker Dealer Accounting) This application is a comprehensive mandatory system designed to manage all the back office functions, including scrip borrowing and lending and Corporate Actions for a member. BDA is used in a PC environment, providing you have mainframe emulation software. The cost here is around R (Excl. VAT) per Logical Unit. You would also request signon s with various levels of access. There is no charge for a signon. Printing During your operation you would be required to either print or send electronic reports. The options available are as follows: You can outsource your printing to a service provider to print hard copy. You can make use of the electronic software ERD Electronic Report Distribution You can make use of an electronic service provider who would receive the data via XML format and then manipulate the data and distribute according to your requirements ( /hard copy/ mail etc.) You can print your own hard copies, where we route the data files to a remote printer and you print at your site. Stationary There is a 1 month period to create your stationary. This will include your logo which we would require in a specific format. This is only done once you have submitted your plan for approval and Surveillance has indicated that it is fine to go ahead with this. Membership Fee There is a once of application fee of R (Excluding VAT). Once a member is approved there will be a monthly membership fee charged, this ranges from the following: Category A membership R (Excluding vat) Category B membership R (Excluding vat) Category C membership R (Excluding vat) Category D membership R (Excluding vat) Category E R (excluding vat) per month Page 5 of 9

6 Members Category is based on the each member s value, volume and trades which is reviewed annually. If for example the JSE has 55 Equity Members, each members will be ranked based on their value, volume and trades. Once the review is done the top 11 Equity Members would be ranked Category A, the next 11 in Category B etc. As new member you would automatically be ranked Category E, this will be reviewed at the end of the year again. Training Examinations will be administered by the South African Institute for Financial Markets (SAIFM) or Employees of Member Firms intending to write the following examinations: TradElect Traders Compliance Officer Settlement Officer All bookings for the examinations must be made through the institute and they can be contacted on (011) Communication We have various means of communicating to our customers. The JSE Account Officer would be your primary contact at the JSE. Web access, our Extranet is a secure web page for all our customers with price and service related information (as soon as you have been approved we will arrange access). General purpose gazettes (The JSE s official) notification mechanism. Hotlines for all system related communication. Associated Costs Fixed Expenditure Base Requirement R SWIFT Application - BIC Code 5000 Euros SWIFT Monthly costs 166 Euros SWIFT Subscription Fee R (PM) (incl. of VAT) Non Refundable Membership application Fee R11940 H2H Trading Solution R (PM) (incl. of VAT) BDA Subscription Fee R (PM) (incl. of VAT) R per terminal (incl. of BDA terminals VAT) Category E Membership R (PM) (incl. of VAT) Page 6 of 9

7 Supporting Documentation Supporting documents to accompany your originally membership application and Completed Trading Service Questionnaire: Directive FI - Appointment of a JSE member as a Settlement Agent Directive FL - Appointment of a JSE member as a Custody Services Provider Memorandum and Articles of Association Certificate of Incorporation Agreement entered into between members of the Company relative to the shareholding of the Company An analysis of the shareholding of the Company Curricula Vitae of Directors Technical Diagram of proposed technical connectivity to the JSE Organogram reflecting your proposed staff and board structure Describe and list the proposed functions, duties, qualifications and experience of your CEO, Stockbroker in control, Compliance Officer, Settlement Officer and Financial Director/Manager Provide a computation of your firm s estimated Adjusted Liquid Capital in terms of Directive DC 2.1. Provide a 12 month operating budget reflecting all material items of income and expenditure. Provide a computation of your firm s estimated fixed base requirement in terms of Directive DC 12. How will you ensure that your system of internal control and risk management procedures are operating effectively on an ongoing basis? List your intended BDA accesses, indicating the name and job title of each person with access, the functions to which they will have access and whether they will have update and/or enquiry access. Submit the applicant s documented internal complaint handling procedures in terms of rule Submit the applicant s documented internal rules as prescribed in section 42 of FICA and related regulations (specifically GNR 1595 of December 2002 as amended by GNR 456 of 20 May 2005). A non-refundable cheque of R (excluding VAT) Page 7 of 9

8 APPENDIX A KEY STAFF APPOINTMENTS The key staff appointments required for an Equity Membership are as follows: Compliance Officer Settlement Officer Alternate Settlement Officer Stockbroker in control Equity Trader/s Compliance Officer All member firms are required by the JSE rules to appoint a Compliance Officer to ensure compliance by the member with the provisions of the Security Services Act, the Rules and Directives of the JSE and Board decisions. It is stipulated in the rules that such Compliance Officers shall have been declared competent in the compliance officer assessment as prescribed by the JSE. Amongst other things, the Compliance Officers are fully responsible to the JSE for the actions of the member including its officers and employees, and are also subject to disciplinary powers and procedures of the JSE. In addition, they are required to report any apparent contraventions of the Act, the Rules and Directives of the JSE or Board decision member to the JSE Director: Surveillance. Qualifications required for a Compliance Officer is as follows: Need to have completed Compliance Officer exam through SAIFM - JSE Compliance Exam Experience on BDA (Broker Dealing Accounting) JSE s back office/middle office system. Relevant experience in the JSE Equity Market Settlement Officer/Alternate Settlement Officer Every broking member (equities) is required by the JSE to appoint a Settlement Officer and alternate Settlement Officer, responsible for:- dealing with all queries by the JSE in relation to settlement; ensuring that all transactions are settled in terms of the Rules and Directives of the JSE; advising the JSE of any issue that may potentially impact on the settlement of a transaction; and co-operating with the settlement authority to ensure the efficient and timeous settlement of all transactions. Qualifications required for a Settlement Officer is as follows: Need to have completed Settlement Officer exam through SAIFM - JSE Settlement Officer Exam Experience on BDA (Broker Dealing Accounting) JSE s back office/middle office system. Relevant experience in the JSE Equity Market Page 8 of 9

9 Stockbroker in control Qualifications required for a Stockbroker in control is as follows: Registered Persons Exam for the Equities Market Registered Persons Exam for the Bond Market (Compliance) Registered Persons Exam for the Futures Market JSE Settlement Officer Exam JSE Compliance Exam (For more information on the above go to OR Those with the following qualifications: B.Com (Hons)(Investment Advice) Chartered Accountant (South Africa) Chartered Financial Analyst OR Those who have completed a degree AND the one-year SAIS bridging course Programme in Investment Analysis & Portfolio Management at UNISA. The SAIS (South African Institute of Stockbrokers) requirement is that all five modules of this course must be completed. [Credit will be given for an SAIS recognised equivalent one year course at an approved South African University provided the course covers all the identified subjects]. Please contact Erica Bruce from SAIS should you have any queries on Equity Trader Qualifications required for a trader are as follows: Need to have written the JSE Equity Trader Exam Page 9 of 9