The JSE Interest Rate Market Consolidates Membership,
Systems and Trading Rules
May 12, 2011
JOHANNESBURG, 11 MAY 2011. The JSE’s implementation of a
single trading rule book for its interest rate market is a major step forward in
the development of South Africa’s interest rate market encompassing cash bonds,
bond repos and interest rate derivatives. This rule book, combined with the new
Debt Listings Requirements that went live on 31st March greatly simplifies the
listing and trading of bonds and bond derivatives. The integration makes it
possible to trade all listed interest rate instruments on a single trading
platform. This achievement, within a regulated exchange environment, places the
exchange in a leadership position among global interest rate markets.
Worldwide, the global financial crisis has focused regulators and
exchanges on creating more transparent, better regulated exchanges. Of
particular importance is the moving of over-the-counter products into a
regulated exchange environment.
The integration of the rule books of
former competing markets, Yield-X (operated by the JSE) and the previously
independent Bond Exchange South Africa (BESA), now owned by the JSE, moves the
exchange closer to fulfilling this aim for the local interest rate market.
The trading system and rules provide for both a central order book and
the ability to report transactions negotiated off the central order book to the
“The intention is to bring execution of the most liquid
part of the South African Government bond market on-exchange. The benefits of
the changes include transparent pre-and post trade prices and fair anonymous
execution, allowing the JSE to extend the reach of the market to increase the
number and types of market participants and to improve access for participants
located outside South Africa. Ultimately, this is aimed at attracting a greater
number of members and creating conditions for growth,” says Graham Smale,
Director of Interest Rate Products at the JSE.
The rules covering the
integrated markets will be known as the JSE Interest Rate and Currency (IRC)
rules and directives. Though the aim is not to fundamentally change the way in
which interest rate products are traded on the JSE, there will be certain
changes to elements of the market structure and the regulatory requirements. The
combined rulebook now provides for the JSE’s structure and discipline, whilst
still incorporating the key elements of the BESA bond market’s trading
practices. All members now have access to a Central Order Book and anonymous
counterparties, with transactions executed through the Central Order Book being
cleared through the JSE-owned SAFCOM clearing house.
The integration of
the rules was part of the merged business’ original consolidation plans, which
have been discussed with participants since the 2009 acquisition of BESA.
The main objectives of the integration of the markets are to consolidate
trading in JSE listed interest rate products on a single trading platform, and
to align the regulatory requirements and the process applied by the JSE in
managing trading and settlement of interest rate products under a common set of
rules. “The JSE believes that the reforms will ultimately develop the market by
growing liquidity, improving market efficiency and achieving increased
transparency,” says Smale.
FOR FURTHER INFORMATION PLEASE CONTACT:
Corporate Communications Consultants
Tel: +27 11
Cell: +27 72 452 1772
Director of Interest Rate Products
Tel: +27 11 520 7831