SECURITY SERVICES BILL, 2004

1. SECURITY SERVICES BILL, 2004 PRESENTATION TO THE PORTFOLIO COMMITTEE ON FINANCE BY Samantha Anderson, Director of Financial Markets 12 August 2004 National Treasury, Republic of South Africa

2. OVERVIEW OF PRESENTATION • HISTORY OF SOUTH AFRICA’S FINANCIAL MARKETS • KEY DEVELOPMENTS SINCE 1994 • THE FUTURE OF SOUTH AFRICA’S FINANCIAL MARKETS National Treasury, Republic of South Africa

3. HISTORY OF SOUTH AFRICA’S FINANCIAL MARKETS DEFINING STAGES OF DEVELOPMENT • 1680’s – 1880’s : Tradable paper in agricultural commodities; African Theater Company in 1782; Joint Stock Companies Limited Liability Act, 1861 • 1880’s – 1940’s : Kimberley Royal Stock Exchange 1881; twenty four stock exchanges in South Africa in mid-1880’s; JSE founded in November 1887; uniform rules for all stock exchanges in 1890 – regulation of brokerage commission (3) 1940- 1990’s : Boom years of 1945 and 1946 (discovery of gold in the Free State); Stock Exchanges Control Act, 1947; establishment of the Financial Institutions Office – 1956; Stock Exchanges Control Act of 1985; Financial Markets Control Act of 1989; Financial Services Board - 1991 National Treasury, Republic of South Africa

4. KEY DEVELOPMENTS SINCE 1994 • JSE SECURITIES EXCHANGE SOUTH AFRICA - EQUITY • 8 November 1995, JSE changed its organisational structure - limited liability corporate and foreign membership was permitted • Dual capacity trading, negotiated commissions and automated trading in selected securities were phased in from 8 March 1996 • The open outcry trading floor was closed on 7 June 1996 and replaced by fully automated electronic trade in respect of all listed securities on the JET System National Treasury, Republic of South Africa

5. KEY DEVELOPMENTS SINCE 1994 Source : JSE National Treasury, Republic of South Africa

6. KEY DEVELOPMENTS SINCE 1994 • JSE SECURITIES EXCHANGE SOUTH AFRICA – EQUITY (contd.) • On 18 August 1997, JSE introduced a real time news service for the dissemination of company announcements and price sensitive information - SENS (Stock Exchange News Service) • 1997 – Immobilisation and subsequently dematerialisation of share certificates began – dematerialisation completed in March 2002 • In November 1999, the electronic clearing and settlement system, STRATE (Share TRAnsactions Totally Electronic) was introduced National Treasury, Republic of South Africa

7. KEY DEVELOPMENTS SINCE 1994 • JSE SECURITIES EXCHANGE SOUTH AFRICA - EQUITY (contd.) • The JSE merged with Safex in 2002 to broaden its product range and achieve economies of scale • JSE/FTSE Africa Index Series launched in 2002 • King Code – Listings requirement updates in 2002 and 2003 • STRATE and Unexcor/ CD Limited merge in 2003 • JSE launches ALTx and SRI Index in 2003 National Treasury, Republic of South Africa

8. KEY DEVELOPMENTS SINCE 1994 • BOND EXCHANGE OF SOUTH AFRICA (BESA) - DEBT • The process towards the establishment of BESA began with the formation of the Bond Market Association (BMA) a voluntary association formed by the major participants of the bond market with 75 members • May 1994 - the Bond Market Association (BMA) appoints the Universal Exchange Corporation Ltd (UNEXcor) as the clearinghouse for all BMA transactions • 1995 – CD Limited takes on all listed bonds to facilitate electronic settlement of all transactions executed on the BMA • 26 October 1996 – full electronic settlement through UNEXcor and CD Limited takes place • 15 May 1996 BMA became BESA a self-regulatory body licensed under the Financial Markets Control Act No 55 of 1989 National Treasury, Republic of South Africa

9. KEY DEVELOPMENTS SINCE 1994 • BOND EXCHANGE OF SOUTH AFRICA (BESA) - DEBT (contd.) • In November 1997 the settlement period on BESA was reduced from T+10 to T+3 rolling settlement in line with G30 recommendations • In October 1998 the open outcry bond floor was closed, and trading now takes place via inter-dealer brokers’ screens and / or via telephone using prices published by data vendor firms. • 2000 • Trades booked on new Bond Automated Trading System (BATS). • BESA implements the Total Return Index (TRI) National Treasury, Republic of South Africa

10. KEY DEVELOPMENTS SINCE 1994 • BOND EXCHANGE OF SOUTH AFRICA (BESA) - DEBT (contd.) • 2001 • BESA lists first mortgage-backed securitisation • BESA members approve restructuring plan National Treasury, Republic of South Africa

11. KEY DEVELOPMENTS SINCE 1994 • SOUTH AFRICAN FUTURES EXCHANGE (SAFEX) - DERIVATIVES • SAFEX is licensed under the Financial Markets Control Act of 1989 in 1990 • January 1995 – SAFEX Agricultural Derivatives Division opens • May 1996 - Introduction of fully-automated trading • September 1997 - Individual equity options introduced on the six largest equity counters • March 1998 – Options introduced on agricultural products • SAFEX and JSE merge in 2002 National Treasury, Republic of South Africa

12. THE FUTURE • The structure of internationally exchanges is changing – service providers rather than clubs for members - demutualisation • Global competition from institutions that are not traditional exchanges • Regulation is moving away from defining an institutional structure for the provision of security services • Efficiency, security and cost effectiveness of trading, clearing and settlement is key • International financial architecture – compliance with standards and codes National Treasury, Republic of South Africa

13. THE FUTURE • South Africa to position itself as a Financial Centre for Africa • Inward Listings • New markets and products • Lowest cost of trading • Investor protection • Foreign pool of talent • Business Processing Outsourcing National Treasury, Republic of South Africa

14. QUESTIONS? National Treasury, Republic of South Africa