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AMEDA LEADERSHIP FORUM. Risk Management and Depository Services. Interbank Money Markets and Payment Systems: A Two Way Relationship. PRESENTED BY: Anthony van Eden DATE: 28 th April 2009. Glossary of Terms and Acronyms. Presentation Overview. South African Money Market statistics;
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AMEDA LEADERSHIP FORUM Risk Management and Depository Services Interbank Money Markets and Payment Systems: A Two Way Relationship PRESENTED BY: Anthony van Eden DATE: 28 th April 2009

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Glossary of Terms and Acronyms

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Presentation Overview South African Money Market insights; Background toward the South African Money Market; Risk administration through the organization of base in MM - The South African Dematerialisation of MM Project; Other advantages connected with a dematerialised MM.

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South African Money Market Statistics Average Duration per Issue - 100 days

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Background toward the South African Money Market Informal market– no trade or Automated Trading Systems; Clearing and settlement unaltered since beginning of MM; No formal Market Association; Bearer declarations; telephonic exchanging ; paper based settlement directions; physical guardianship; manual recording of "proprietorship" and coupon estimations; no ensured SFIDvP; endorsement part; physical conveyance against Capital Events; Stringent trade controls;

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Background toward the South African Money Market (proceeded with) Securities Services Act; National Credit Act; Deposit Taking Institutions Act; Central Bank (SARB) in charge of fiscal arrangement and supervision; Capital Adequacy Ratio: Required 9,75%; Actual 2008 between 12% - 14%; Liquid Asset Requirement - Banks can just utilize 50 % intra-day and 25% of insurance at SARB between day; Banking IT frameworks, procedures and methodology strong and moderately progressed;

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Risk Management Through the Deployment of Infrastructure in Money Markets Risk Reduction: Operational; Credit; Settlement; Systemic; and Reputational.

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Strate\'s Money Market Securities System – Phase 1

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High Level Interaction 2 JSE (NNA) MMS Issuers 1 MFA 4 A Traders A 4 2 MMPBPR MMCCR MMSR 5 1 2 Message Router 3 4 3 1 Optional Message Router Issuer 1 ETME A 4 Issuer Agent 2 Bulk Matching 1 Issuer Agent 3 2 Custodian 5 3 2 A CLIENTS Custodian 4 A Bilateral Bulk Trade Allocation SOR 4 3 Trader Optional 5 4 Trader 7 9 12 Ref Nos. 5 FULL Participant 8 Corporate Participant 6 13 Settling Bank Ref Nos. 7 Message Router 8 14 9B 9A 13 11 10 Settling Banks 11 SAMOS RTL 11 10 Information Flows: 14 - Cash Movement…

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Reduction of Operational hazard Accurate and finish recording End to end STP – from ISIN issue to Maturity ; Standardized electronic correspondence with MMSS – ISO 15022 message sorts; All MM securities will be:- institutionalized into four non specific classifications ; distributed an ISIN constant through the CSD; issued, exchanged and settled electronically ; Use of one of a kind identifiers - Participants, Business Partners, speculators, security issuing, SOR Securities Accounts, exchange coordinating, clearing and settlements exchanges and Capital Events; Electronic Trade Matching Engine ("ETME") – post exchange/pre-settlement approval exchange data ;

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Reduction of Operational hazard (proceeded with) Accurate and finish recording (proceeded with) Any change in valuable possession must be accounted for to ETME; Trade points of interest can\'t be adjusted or crossed out once coordinated; Carries, Repurchase Agreements (Repos) and Reverse Repos regarded as Sale and Buy Back exchanges –change in useful responsibility for; Both legs to Buy Backs reported at the same time - every one of the four legs must match; Amendment to 2 nd leg of Buy Back reported by both counterparties to ETME for coordinating; ETME cautions exchanging party where counterparty leg coordinate not set aside a few minutes interim; Standardized bland settlement methodology for exchanges and Capital Events;

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Reduction of Operational hazard (proceeded with) Security Securities issued into and held in electronic organization in the SOR in CSD; SOR lawfully viewed as record of authoritative proprietorship ; Communication with MMSS by means of SWIFT or Strate WAN – solid, secure and hearty; Use of one of a kind identifiers for Participants and Business Partners connected to parts in the MMSS; Transfer of proprietorship in light of SFIDvP; Capital Events paid to entitled financial specialists\' Participants altogether for dissemination.via bookkeeping passage. Existing secure and demonstrated between bank settlement frameworks by means of SARB SAMOS RTL utilizing ISO 15022 messages over SWIFT base;

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Reduction of Settlement Risk Carries; Repurchase and Reverse Repurchase Agreements regarded as change in gainful proprietorship i.e. Purchase Backs; All four legs to Buy Backs reported MUST coordinated for settlement of 1 st leg; Amendment to 2 nd leg of Buy Back answered to ETME ; Matched mass exchanges cleared and settlement directions handled on a gross essential to-key premise; Participants have entry to ongoing records of customer Securities accounts. Members focus on conveyance of securities/settlement for customer\'s coordinated exchanges "Against" and "Free" of Payment;

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Reduction of Settlement Risk (proceeded with) Payment directions just sent to Participant by CSD once responsibilities for conveyance and settlement coordinated by MMSS; Securities focused on conveyance "saved/bolted" in SOR Securities Account pending affirmation of last and irreversible settlement; Pledged securities held/secured SOR Securities Account until Pledge Release guidelines got or security develops; Participants advised instantly by CSD when inadequate securities for conveyance ; Trade settlement just falls flat at close of SARB settlement windows;

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Reduction of Settlement Risk (proceeded with) Settlement status messages sent by MMSS to Participants which can likewise question on-line, ongoing ; "Continuous" settlement in Central Bank stores (SAMOS RTL) or intra-bank ("on-us";) for exchanges and Capital Events; Existing secure and demonstrated between bank settlement frameworks by means of SARB SAMOS RTL utilizing ISO 15022 messages over SWIFT base;; Transfer of securities synchronous with affirmation "Last and Irrevocable" settlement in Central bank Funds or "on us." Capital Events settled electronically on installment date; Standardized nonexclusive settlement strategies for exchanges and Capital Events ;

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Reduction of Credit Risk Participants need to resolve to money settlement before securities are saved/bolted; Use of SARB SAMOS RTL:- Final and unavoidable settlement; Real time accessibility of assets on settlement date; Facilitates more productive and precise credit administration – income determining; SARB has constant measurements of consistence with Liquid Asset Requirements;

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Reduction in Systemic hazard Bulk exchanges cleared and settled on Gross important to essential settlement – evade one "fizzle all come up short;" Participants have capacity to electronically solidify Securities Accounts of its customers; Curator delegated by the SARB can put solidify over the greater part of a banks Securities Accounts. SARB has ongoing measurements of consistence with Liquid Asset Requirements;

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Reduction in Reputation chance Combating Money Laundering Ownership kept up in CSD at valuable proprietor level in SOR; Only outside organizations can open Nominee accounts in SOR; SOR legitimately viewed as the "complete record of possession." Settlement greatness Achieved through hazard alleviation delineated previously.

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Other Benefits Associated with a Dematerialised MM Improvement in Liquidity More convenient settlement of exchanges and Capital Events by means of SAMOS RTL ought to expand action in the optional market; Enhanced STP Commensurate Cost investment funds connected with paper driven issuing, recording, care and settlements.

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