Bond Exchange of South Africa

The Bond Exchange of South Africa Limited (BESA) is an independent, licensed exchange [http://www.nasdaq.com/newsroom/news/newsroomnewsStory.aspx?textpath=pr2008%5CACQPMZ200809041101PRIMZONEFULLFEED149695.htm] [http://www.hmrc.gov.uk/fid/bond-exch-s-africa.htm] , constituted as a public company, and responsible for operating and regulating the debt securities and interest rate derivatives markets in South Africa.

History

BESA was granted its exchange licence in 1996 and over the past ten years has been at the forefront of market developments in South Africa.

In 2007 the BESA partnered with the OECD in workshops on African Debt Management [http://www.oecd.org/document/62/0,3343,en_2649_27994977_38260542_1_1_1_37467,00.html] .

In December 2007 BESA entered a new era, successfully converting from a mutual association to a public company. As a demutualised exchange, BESA will now be able to raise capital to grow its business, diversify revenues and accelerate the development of financial market infrastructure in South Africa.

As the direct regulator of the bond market, BESA operates within the framework of the Securities Services Act 2004 and a set of rules and directives approved by the Financial Services Board (FSB). BESA's rules and directives serve as a tool for regulating both issuers and trading participants. All securities listed by the Exchange must meet minimum disclosure standards. Extensive rules also apply to trading participants, with BESA undertaking active surveillance over all aspects of market activity as well as requiring compliance with a variety of best-practice standards. The Exchange provides various investor-protection mechanisms, including a guarantee fund to compensate counter-parties for any market movement losses arising from a trading default. To the Exchange’s credit, no participant defaults or claims on the fund have ever been lodged with BESA.

The South African bond market is a leader among emerging-market economies. Turnover reported on BESA in 2007 reached a record R13.8 trillion. Given a nominal value for listed debt securities of R781 billion, and a locally-settled total turnover of R18.6 trillion, overall market velocity in 2007 grew to 23.8 times from 20.4 times the previous year.

South Africa’s local bond market is still dominated by securities issued by the South African government, with local government, public enterprises and major corporations accounting for the rest of the debt issuers active in the market. The number of borrowers and listed bonds as well as the market capitalisation have all risen sharply – at December 2007 BESA had listed some 967 debt securities, issued by 104 sovereign and corporate borrowers, with a total market capitalisation of R862 billion.

In particular, participation in the local bond market by corporates has increased rapidly over the past five years, with some R265 billion in issue at end-2007 covering a range of structural types and pricing methods. As at December 2007, some 34% by nominal value of the securities listed on BESA comprised corporate issues.

Quick facts

Trading Days: 24 hour trading Monday to Friday
Trade Reporting Hours: 07:00 to 18:00 on trading days
Trading Structure: Screen and telephone
Market Architecture: Counterparty risk market with users operating in dual capacity
Instruments Traded: Debt securities and interest-rate derivatives
Clearing and Settlement: Secure, final, irrevocable electronic delivery versus payment on a rolling t+3 basis, using a nett settlement model underpinned by a guarantee fund of R100m
[http://www.bondexchange.co.za]

References

reference: www.bondexchange.co.za

External links

* [http://www.bondexchange.co.za/ Bond Exchange of South Africa]