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Johannesburg - The Financial Services Board (FSB South Africa) has granted Granite Central Securities Depository a financial market infrastructure license.
It is the first of its kind under the Financial Markets Act. Granite CSD is, therefore, South Africa’s first independent central securities depository (CSD) to settle securities, specifically in the debt securities market in the country.
Granite CSD plans to commence operations in the first quarter of 2016, and will initially be focused on the bond market, with money market and other products tabled for introduction in the near future, it said on Thursday.
The emphasis will be on providing efficient and cost effective service with shorter settlement intervals and a stronger focus on innovation and settlement risk reduction.
"This marks a significant challenge to the status quo which has until now operated in a monopoly scenario, with investors compelled to settle securities through a single service provider.," said Granite.
Granite’s CSD model will allow for investment opportunities from the various financial market institutions, including debt issuers, authorised users, international banks, South African banks, asset managers, dealer brokers, and other parties for whom greater involvement in the
strategy of a CSD would be beneficial to the market.
“Our model, and entry into the market, is intended to provide people with an alternative to the status quo, from our operations to our strategy, through a user-owned model,” said Leon Rossouw, founder and CEO of Granite CSD.
“It will give access to all market participants, with a representative governance structure that will fulfil shareholder objectives. Furthermore, it will support liquidity in the South African debt market by providing more frequent settlement cycles and settlement stability.”
He said of particular interest to banks’ liquidity desks is that, while Granite CSD will launch with two settlement cycles each day, set to coincide with the status quo, it plans to introduce more frequent settlement runs during the day, running as often as hourly, and as late as 18:00 for internal settlements.
Transactions due for settlement on the same day can be reported for settlement at any time during that trade day, with settlement happening on the same day provided the seller can deliver the assets and payment can be secured.
Granite CSD believes that repurchase agreements should be seen as money market instruments, and that these types of agreements are recognised as collateralised loans, and as such should not be treated in the same way as spot bond transactions. It believes that these transactions can be reported directly to Granite CSD for settlement purposes, lessening the reporting burden and costs associated with the current system of reporting and settling these transactions.
