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Financial Markets Act, 2012 (Act No. 19 of 2012)

Chapter III : Preliminary Provisions

Exchange rules

17. Requirements with which exchange rules must comply

 

(1) The exchange rules must be consistent with this Act, the Financial Sector Regulation Act and any standard made in terms of this Act or the Financial Sector Regulation Act.

[Section 17(1) substituted by section 290, item 15(a) of Schedule 4, of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017), Notice No. 853, GG 41060, dated 22 August 2017 - effective 9 February 2018 (Notice R. 99, GG 41433, dated 9 February 2018)]

 

(2) The exchange rules must provide—
(a) for equitable criteria for authorisation and exclusion of authorised users and, in particular, that no person may be admitted as an authorised user or allowed to continue such person’s business as an authorised user unless the person—
(i) is of good character and high business integrity or, in the case of a corporate body, is managed by persons who are of good character and high business integrity; and
(ii) complies, or, in the case of a corporate body, is managed by persons or employs persons who comply, with the standards of training, experience and other qualifications required by the exchange rules;
(b) for the authorisation and criteria for authorisation of the securities services that authorised users may provide, and if—
(i) there are different categories of—
(aa) authorised users, for the authorisation and criteria for authorisation of the securities services that each category of authorised user may provide;
(bb) securities listed on an exchange, for the authorisation and criteria for authorisation of the categories in respect of which an authorised user may provide one or more securities services;
(ii) the exchange authorises its authorised users to perform securities services in respect of securities not listed on the exchange, for the authorisation and criteria for authorisation of the categories of such securities in respect of which an authorised user may provide one or more securities services;
(c)
(i) for the capital adequacy, guarantee and risk management requirements with which an authorised user must comply;
(ii) that capital adequacy, guarantee and risk management requirements must be prudent although they may differ in respect of different categories of authorised users or different activities of an authorised user’s business;
(d) for an efficient, honest, transparent and fair manner in which and terms and conditions subject to which transactions in listed securities must be effected by authorised users, whether for own account or on behalf of other persons;
(e) for the manner in which transactions in listed securities must be cleared and settled;
(f) if the exchange has not appointed a clearing house for the clearing of transactions effected through the exchange,—
(i) for the determination as to which transactions will be cleared by the exchange;
(ii) for the circumstances in which the exchange may refuse to clear a transaction in securities which would otherwise be cleared in terms of the rules in subparagraph (i);
(iii) for the monitoring of settlement obligations of authorised users and their clients;
(g) for the regulation of transactions in listed securities entered into as a result of any first communication made to a person without an express or tacit invitation from such person;
(h) subject to the provisions of section 38(3) and section 41, for the circumstances in which a transaction in listed securities may be declared void by the exchange;
(i) that no authorised user may conduct business with a person whom the authorised user believes or suspects requires approval as a nominee under section 76 or approval to undertake management of securities in terms of any law, without having taken reasonable measures to ascertain that such person has the necessary approval;
(j) for the approval by the exchange of a nominee of an authorised user which nominee holds securities in a securities account or central securities account as defined in Chapter IV;
(k) for the manner in which the exchange monitors compliance by its authorised users with this Act, and the exchange rules and exchange directives;
(l) for the conditions subject to which an officer or employee of an authorised user may, in relation to the buying and selling of listed securities, advise on or conclude any transaction on behalf of an authorised user in the course of that authorised user’s business and for the circumstances in which an officer or employee of an authorised user may be denied access to the exchange;
(m) for the circumstances in which trading in any listed security may be suspended or halted;
(n) for the manner in which an authorised user is required to conduct the securities services for which it is authorised generally;
(o) for the operation by an exchange or authorised user of a trust account contemplated in section 21;
(p) for the manner in which authorised users must comply with section 22;
(q) for the—
(i) recording of transactions effected through the exchange;
(ii) monitoring of compliance by authorised users with the exchange rules and exchange directives; and
(iii) surveillance of any matter relevant for the purposes of this Act, and the exchange rules and exchange directives;
(r) for the circumstances and manner in which an authorised user may advertise or canvass for business;
(s) for a process whereby complaints by authorised users against the exchange in respect of the exercise of functions by the exchange may be made, considered and responded to;
(t) for the manner in which complaints against an authorised user or officer or employee of an authorised user must be investigated;
(u) for the steps to be taken by the exchange, or a person to whom the exchange has delegated its investigative and disciplinary functions, to investigate and discipline an authorised user or officer or employee of an authorised user who contravenes or fails to comply with the exchange rules, the interim exchange rules or the exchange directives, and for a report on the disciplinary proceedings to be furnished to the Authority within 30 days after the completion of such proceedings;
(v) for the manner in which an authorised user, officer or employee of an authorised user who is believed to—
(i) be able to furnish any information on the subject of any investigation referred to in paragraphs (u); or
(ii) have in such person’s possession or under such person’s control any document which has bearing upon that subject, may be required to appear before a person conducting an investigation, to be interrogated or to produce such document;
(w) in respect of the insurance, guarantee, compensation fund or other warranty referred to in section 8(1)(h), for—
(i) the persons who must contribute to maintain such insurance, guarantee, compensation fund or other warranty; and
(ii) the amount of the fee imposed by the exchange for this purpose;
(iii) different categories of claims that may be brought against the insurance, guarantee, compensation fund or other warranty;
(iv) restrictions on the amount of any claim;
(v) the control and administration of the insurance, guarantee, compensation fund or other warranty; and
(vi) the ownership of the insurance, guarantee, compensation fund or other warranty;
(x) that authorised users must disclose to their clients the fees for their services, which disclosure must give the specific monetary amount for each service rendered; or if such amount is not pre-determinable, the basis of the calculation;
(y) that authorised users may charge a fee for different categories of transactions;
(z) for the purposes for which, and the process by which, an exchange may issue exchange directives;
(aa) for supervisory measures that enable the exchange to comply with section 10(2)(c), (d) and (e);
(bb) for the authority of, and the manner in, and circumstances under which—
(i) an exchange may limit the revocation of any settlement instruction given by an authorised user or its client;
(ii) on the commencement of insolvency proceedings, an authorised user or client may revoke any settlement instruction before the point in time when settlement instructions become irrevocable as determined in the exchange rules, but prior to settlement;
(iii) an exchange or an authorised user may terminate transactions on the commencement of insolvency proceedings;
(cc) for the arrangements to be made in relation to the administration of securities and funds held for own account or on behalf of a client by an authorised user, including the settlement of unsettled transactions, under insolvency or default proceedings in respect of that authorised user;
(dd) for the manner in which an authorised user who is acting as an inter-dealer broker is required to conduct its inter-dealer broking services, including the manner in which the inter-dealer broker broadcasts bids and offers that it receives, if applicable;
(ee) for the circumstances in which an authorised user may or may not transact in listed securities using the services of an inter-dealer broker who is not an authorised user;
(ff) that authorised users must notify the exchange as soon as it commences an insolvency proceeding or an insolvency proceeding is commenced against it; and
(gg) for the supervision by an exchange of compliance with the duties imposed on its authorised users by the Financial Intelligence Centre Act.

 

(2A) Regulations or standards may prescribe additional matters to those listed in subsection (2) that must be contained in the exchange rules.

[Section 11(2A) inserted by section 290, item 15(b) of Schedule 4, of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017), Notice No. 853, GG 41060, dated 22 August 2017 - effective 9 February 2018 (Notice R. 99, GG 41433, dated 9 February 2018)]

 

(3)
(a) Any rules made in terms of subsection 2(e) or 2(bb) or 2(cc) must have due regard for, and not be in conflict with, any applicable depository rules.
(b) Any rules made in terms of subsection (2)(bb) and (cc) must have due regard for, and not be in conflict with, section 8 of the National Payment System Act.

 

(4)
(a) Subject to section 5(1)(c) and (2) and the requirements prescribed in joint standards, the exchange rules may provide for the approval of external authorised users to be authorised users of the exchange.

[Section 11(4) substituted by section 290, item 15(c) of Schedule 4, of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017), Notice No. 853, GG 41060, dated 22 August 2017 - effective 9 February 2018 (Notice R. 99, GG 41433, dated 9 February 2018)]

(b) If the exchange rules provide for this, the rules must provide, in accordance with paragraph (a), for the identification of those securities services that will be authorised and regulated by the exchange in terms of the exchange rules and those that will be authorised and regulated by the supervisory authority of the country under whose laws the external authorised user is authorised and supervised.

 

(5) The exchange rules made under this section apply to an authorised user only to the extent that those rules apply to—
(a) all authorised users generally; and
(b) the securities service or services for which that authorised user has been authorised by the exchange.

 

(6) An exchange may, with the approval of the Authority, make exchange rules on additional matters that are not inconsistent with this Act.

 

(7) An exchange rule made under this section is binding on—
(i) the exchange;
(ii) the authorised users of the exchange;
(iii) issuers of securities listed on that exchange;
(iv) the officers and employees of the exchange, its authorised users and issuers; and
(v) clients of its authorised users.