STRATE Ltd Bev Brazier Head : CSDP Supervision Peru November 2002

1. STRATE Ltd Bev Brazier Head : CSDP Supervision Peru November 2002

2. Public unlisted company • Appointed settlement system of the JSE Securities Exchange • Settles listed equities and warrants electronically • Appointed Self-Regulatory Organization www.STRATE.co.za

3. ABSA Nedcor Standard Bank First Rand Citibank Ownership JSE STRATE Ltd 50% 50% CSDP A CSDP C CSDP B Participation STRATE - The Company www.STRATE.co.za

4. IOSCO Recommendation 13 Governance Governance arrangements for CSDs should be designed to fulfil public interest requirements and to promote the objectives of owners and users.

5. STRATE - Management • Chairman - Mr Mervin King • Board of Directors / Controlling Body • Audit Committee • Regulatory Committee • Remunerations Committee • CEO : Monica Singer • Departmental Heads www.STRATE.co.za

6. IOSCO Recommendation 6 CSDs Securities should be immobilised or dematerialised and transferred by book entry in CSD’s to the greatest extent possible.

7. Certificated Dematerialised Dematerialisation to date ... www.STRATE.co.za

8. IOSCO Recommendation 1 Legal Framework Securities settlement systems should have a well founded, clear and transparent legal basis in the relevant jurisdictions.

9. Companies Act • Section 91A • - allows for both paper and electronic transfer of ownership • - change reflected in the CSDP sub-register • - sub-register deemed to be the register www.STRATE.co.za

10. JSE Trading Stock Exchanges Control Act • Securities must be dematerialised in order to be traded on the JSE Securities Exchange • Trade matching • SETS = Stock Exchange Electronic Trading Service • Brokers use SETS to trade listed equities and warrants. www.STRATE.co.za

11. Custody and Administration of Securities Act 1992 • Registration as a CSD - entry criteria • Rules for the CSD • Powers of the CSD • Regulate CSDPs • Registration of CSD Participants. www.STRATE.co.za

12. IOSCO Recommendation 18 Regulation and Oversight

13. Regulatory Environment SARB JSE STRATE FSB www.STRATE.co.za

14. STRATE as an SRO • FSB appointment • emphasis on self-regulation • expertise • “must regulate any entity that introduces risk to the CSD” • Rule 3.1.1.1 is binding on CSD, CSDPs and any other person utilizing the services of the CSD or a CSDP.” (brokers, Issuers, clients) www.STRATE.co.za

15. Core objectives of securities regulation • Protection of investors • Ensuring markets are fair, efficient and transparent • Reduction of systemic risk www.STRATE.co.za

16. STRATE Regulatory Approach • Risk based • Mutual consent then enforcement • Direct on-going supervision • Reports • SWATs • Fines and Penalties • Restrictions on participation www.STRATE.co.za

17. IOSCO Recommendation 14 Access CSDs should have objective and publicly disclosed criteria for participation that permit fair and open access.

18. CSD Rule 4.1“Participation eligibility”. • depository institution • managed by trained / experienced persons • of good repute • documentation • DR and BRS facilities • financial resources & insurance • adequate systems, procedures, personnel, facilities and technical capacity. www.STRATE.co.za

19. IOSCO Recommendation 12 Protection of customer’s securities. Entities holding securities in custody should employ accounting practises and safekeeping procedures that fully protect customer’s securities. It is essential that customer’s securities be protected against the claims of a custodian’s creditors.

20. Section 6 CSD Rules ACCOUNTS • Deposit STRATE eligible securities only • dematerialisation • one or more SCAs • Section 91A of the Companies Act • segregation of assets • client mandate • daily balancing • no debit balances www.STRATE.co.za

21. IOSCO Recommendations 2 - Trade Confirmation 3 - Settlement Cycles 5 - Securities Lending 7 - Delivery VS Payment 8 - Timing of settlement finality 10 - Cash settlement assets 11 - Operational reliability 15 - Efficiency 16 - Communication procedures & standards

22. STRATE Settlement • Rolling T+5 basis • Guaranteed settlement • JSE Settlement Authority • Final DvP • Transfer of Ownership (SAFIRES) • Transfer of Value (SAMOS) • SWIFT ISO 15022 standards www.STRATE.co.za

23. Settlement of transactions in uncertificated securities. • Directive SCC - Operational Windows • Directive SCE - Same Day Settlement • Directive SCV - Best Practice for Off Market Trades. www.STRATE.co.za

24. IOSCO Recommendation 9 CSD Risk Controls

25. Role of the Compliance Officer • Compliance Officers Forum • CO Examination • Reporting of CSDP Breaches • Daily monitoring, controlling and reconciling • Daily balancing agrees with CSD • Effectiveness of internal controls www.STRATE.co.za

26. Report requirements • Rule 7.1.3/4 Annual Directors Report • Rule 7.1.6.1 Annual External Audit Report • Rule 7.6.2.4 Bi-Annual CO Report www.STRATE.co.za

27. Section 8 - Disputes • Investor Panel • facilitates • reporting • makes recommendations • court of law www.STRATE.co.za

28. Section 9 - Disciplinary Procedure • Surveillance • Investigation • Referral • Definitions of Improper Conduct • Disciplinary Committee • Suspension • Termination www.STRATE.co.za

29. Urgent Issues Committee • Interim Manager • Disciplinary Tribunal • Fines and Penalties www.STRATE.co.za

30. IOSCO Recommendation 4 Central Counterparties IOSCO Recommendation 19 Risks in cross-border links

31. QUESTIONS ?