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Johannesburg Stock Exchange To Entice Investors With New Electronic Settlement System

by Philip Morton,

09 April 2001

The Johannesburg Stock Exchange (JSE) has made great efforts recently to promote itself by joining forces with the London Stock Exchange (LSE), which will allow the exchanges to provide their respective members with remote access to trading in the most liquid securities on each other's markets. In addition the LSE will provide the JSE with its core technology services, including its world class trading system, SETS.

But the JSE isn't stopping there, the exchange has now announced that it will introduce an electronic settlement system to be operational by the end of this year and has appointed Strate (Share TRAnsactions Totally Electronic) - to implement the new system.

Strate has already begun its dematerialisation programme during which all listed companies will be transferred to the new system, it will also enable the settlement of share transactions to take place in a low risk, low cost, electronic environment. Strate says it aims to move about 20 companies a week and anticipates that the process will be complete by December 2001.

When a company moves to Strate its shareholders will be encouraged to submit their share certificates to a custodian bank or qualifying stockbroker for conversion into an electronic record. This process is not compulsory as shareholders may retain their certificates until such time as they wish to sell them. Only then does it become necessary to submit the certificates for dematerialisation so that they are eligible for settlement in an electronic environment.

In a press release from Strate, the company's Chief Executive Officer, Monica Singer, said that her team is fully prepared to handle the intensive transfer of all the listed companies to the electronic settlement environment. She explained: 'The technological challenges are complex but we have spent four rigorous years overcoming those challenges. I am now confident that what we have in place is one of the world's top electronic settlement infrastructures.'

To promote the JSE's new electronic system it plans to embark upon a promotional international roadshow later this month to inform potential investors of these latest measures. 'The roadshow is to get support for the process and to encourage offshore investors to give South African custodians of their shares permission to convert domestic holdings to an electronic record,' said Ms Singer.

And head of marketing at Strate, Allan Beuthin, added: 'It is important to brief investors on their new obligations under Strate and the penalties if they do not comply.' This is because cash fines are likely to be charged on trades which have a doubtful settlement time. Under the electronic settlement system trades will be settled five days after the transaction is performed compared to the JSE's current seven day system and with most exchanges around the world of around three days.

However, the JSE's chief executive officer, Russell Loubser, says that once the system is fully operational he expects it will result in lower trading and settlement costs which should lead the current number of daily trades to double by mid-2002.

The JSE roadshow will take place in London, Boston and New York between April 23 and May 4, 2001.

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