REPUBLIC OF SOUTH AFRICA - Electronic Trading Platform Update 03 Sept 2018

Electronic Trading Platform Update 03 Sept 2018

National treasury
Department:
National Treasury
REPUBLIC OF SOUTH AFRICA
Private Bag X115, Pretoria, 0001. Tel: (+27 12) 315 5944. Fax: (+27 12) 407 9055




                          SENS ANNOUNCEMENT


ELECTRONIC TRADING PLATFORM UPDATE


Electronic Trading Platform

The Electronic Trading Platform (ETP) went live on 18 July 2018 with all nine Primary
Dealers (PDs) trading all available bonds on the platform with the following benchmark
bonds having quoting obligations; R2023(7.75%; 2023), R186(10.50%; 2026),
R2032(8.25%; 2032), R209(6.25%; 2031) and R2048(8.75%; 2048). Additionally, PDs
obligations were effective as of yesterday, 3 September 2018.

Obligations for PDs to undertake efficient market making on the ETP are listed below:

   a. PDs are obliged to quote firm and executable current bid and ask prices/yield on
      the ETP in specified amounts (in size) per maturity and specified spreads.

   b. PDs are under an obligation to quote prices for a period of 5 hours during trading
      hours on any business day, from 7h30 and 17h30.

   c. These obligations are mandatory for the benchmark bonds, which will be reviewed
      on a regular basis.

   d. PD activity on all other bonds excluding the benchmark bonds is voluntary on the
      ETP.

   e. National Treasury (NT) will regularly evaluate individual PD compliance to market
      making obligations on the maturity bands on the ETP.

   f. The definition of maturity bands will be described by the maturity areas on the
      government bonds yield curve. Specific maturity areas are:
          i. 0 – 2 year maturity area without obligation on the ETP,
         ii. 2y + year maturity areas will have specific obligations, as recommended in
             Table 1 below.

   g. Instruments which have been included in a switch auction may have bid-offer
      spreads of up to 10 basis points
                                               2


   h. The maximum bid-offer spreads, linked to the minimum amounts to be quoted on
      the different maturities is indicated in Table 1.


Table 1: Maturity, Size in Rand and applicable Bid-Offer Spread


               Maturity           Bid-Offer Spread (Max) (bps) Amount Size (Min) (R'million)
                02-5yr                          5                           10
               05-10yr                          5                           10
               10-15yr                          5                           10
               15-20yr                          5                           10
                20yr+                           5                           10


Non-comps

Market participants are also advised that NT has communicated, through the JSE, the
following changes to the non-comp benefits made available to PDs:

The level of non-comps will be reviewed by NT on a continuous basis depending on
government funding needs and market developments. The non-comp benefit made
available to PDs as an incentive for participating in the ETP will be within the 50 per cent
envelope currently made available in the primary market. The proportion of the non-
competitive auction benefit which will be applied in the ETP market is equivalent to 30
percentage points, whilst 20 percentage points will be applied in the primary market. For
example, if the amount on offer is R2.4 billion then R1.2 billion will be available on a non-
competitive basis and of the R1.2 billion (50 per cent), R720 million (30 of 50 per cent) will
be on offer to ETP participants and R480 million (20 of 50 per cent) to the primary market.
The allocation of the non-comp will be allocated to reflect the proportionate amounts being
issued into each bond.

In the event that there is a change in the 50 per cent aggregate benefit applied to the
primary and ETP markets, this change will be applied proportionately to maintain the
proportionate split between the ETP and primary markets as noted below. PD’s will be
notified by Monday 11am (24 hours prior) to the weekly auction of their % ETP Non-comp
participation.

The allocation of the ETP portion of the non-comp (30 percentage points of 50 per cent)
will be based on each PD’s total traded volumes in the previous week on the ETP in the
benchmark bonds. In the event that a PD misses quoting obligations for any given day,
that day’s volumes will be forfeited for the purposes of calculating the non-comp allocation
for that specific week.


For further enquiries contact:

S Mpakama
Director: Debt Issuance and Management
012 315 5317

Date: 04/09/2018 03:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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