Good morning ladies and gentlemen.
Thank you to the Johannesburg Stock Exchange (JSE) for inviting the South African Reserve Bank (SARB) to be part of this significant occasion to mark the launch of the T+3 settlement cycle for the equity market in South Africa. Thank you for the opportunity to make some brief remarks this morning.
Allow me to start by congratulating the JSE and the T+3 Project Team, under the guidance of the JSE, on a smooth and successful implementation on the go-live date on 11th July, which represented the culmination of close collaboration over an extended period between numerous stakeholders, and including with the National Treasury, the Financial Services Board, and the SARB.
This is indeed a major milestone, as many of us gathered here today know how much work has gone into this project.
The move to this settlement cycle is a welcome development that contributes towards our continuous efforts to improve the efficiency of, and reduce the risk in, our financial market systems and infrastructures. Not only does T+3 in the equity market align this market segment with the implementation in the bond market, which happened some time ago, it also aligns the South African market to international best practice.
Beyond just creating these efficiencies and synchronising our markets with the rest of the world, an important element of this particular initiative is that its
benefits are shared by many of us as stakeholders in this project, be it as companies listed on the exchange, brokers, investors and indeed as regulators.
The project team at the JSE has done well in highlighting some of the benefits1, and if I can remind everyone present here today, these include:
- Aligning operational practices of the local equity market to global standards;
- Improving the credibility and operational efficiency of the local market;
- Protecting the financial markets through systemic risk mitigation that will follow from reduced credit and liquidity risk; and
- Through increased credibility, assisting in making South Africa a more attractive investment destination to international investors.
These are only a few of the direct and indirect benefits of a shorter settlement cycle, and for South Africa it comes at a time when the JSE is becoming a home to an increasing number of dual-listed companies. According to JSE statistics, the share of companies with dual listings increased from 14 per cent of all companies listed on the JSE in January 2006 to about 24 per cent in July 2016.
As such, harmonising settlement cycles across regions will help with better cash flow and treasury management, and thus facilitate better and more efficient allocation of capital.
Reducing systemic risk and contributing to broader financial system stability
In addition to its primary mandate of price stability, the SARB is also responsible for protecting and enhancing financial stability. We consider financial stability to exist when we have a financial system that is resilient to systemic shocks, facilitates efficient financial intermediation and mitigates the macroeconomic costs of disruption in such a way that confidence in the system is maintained. Read more [PDF]
