JSE Clear to accept securities as collateral to improve cash liquidity
16 February 2024 South Africa
Image: Charlyvaq/Wirestock Creators
JSE Clear, the clearing house for all exchange-traded derivatives in South Africa, has introduced a new service to accept securities as collateral against open JSE derivative positions.
By accepting South African government bonds as collateral, investors will now be able to utilise their cash for different purposes, alleviating cash liquidity pressures and reducing cash funding costs.
Investors with listed JSE derivative exposures can meet their margin collateral requirements by providing a combination of ZAR cash and liquid South African fixed-rate government bonds, the firm says.
Initially JSE Clear will accept government bonds to cover 35 per cent of margin collateral, lowering the risk of cash liquidity constraints which typically arise in times of market stress.
Likewise, the securities collateral service will be available to cover 30 per cent of total collateral requirements in the Equity and Currency Derivatives markets.
JSE Clear intends to increase this percentage and roll out the service to the Commodity and Interest Rate Derivatives markets in the future.
Securities will be held as collateral by adopting the 'pledge' mechanism, meaning the investor retains ownership of the securities, and entitlement to related coupon payments, at all times.
The assets will be ring-fenced and separated from the other assets of JSE Clear, thereby optimising protection of the investors’ assets.
Alicia Greenwood, CEO of JSE Clear, says: "This development contributes positively to the financial efficiency of our investors, and to the lowering of South Africa’s systemic market risk, especially under stressed conditions.
“We envision this initiative offering our clients more flexibility, fostering greater market resilience, and contributing to stronger and more vibrant capital markets.”
By accepting South African government bonds as collateral, investors will now be able to utilise their cash for different purposes, alleviating cash liquidity pressures and reducing cash funding costs.
Investors with listed JSE derivative exposures can meet their margin collateral requirements by providing a combination of ZAR cash and liquid South African fixed-rate government bonds, the firm says.
Initially JSE Clear will accept government bonds to cover 35 per cent of margin collateral, lowering the risk of cash liquidity constraints which typically arise in times of market stress.
Likewise, the securities collateral service will be available to cover 30 per cent of total collateral requirements in the Equity and Currency Derivatives markets.
JSE Clear intends to increase this percentage and roll out the service to the Commodity and Interest Rate Derivatives markets in the future.
Securities will be held as collateral by adopting the 'pledge' mechanism, meaning the investor retains ownership of the securities, and entitlement to related coupon payments, at all times.
The assets will be ring-fenced and separated from the other assets of JSE Clear, thereby optimising protection of the investors’ assets.
Alicia Greenwood, CEO of JSE Clear, says: "This development contributes positively to the financial efficiency of our investors, and to the lowering of South Africa’s systemic market risk, especially under stressed conditions.
“We envision this initiative offering our clients more flexibility, fostering greater market resilience, and contributing to stronger and more vibrant capital markets.”
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
