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

Regulations

Financial Markets Act Regulations

Chapter V : Assets and Resources Requirements for Certain Market Infrastructures

8. Assets and resources requirements for exchanges, central securities depositories, clearing houses and trade repositories

 

(1) An applicant for an exchange, central securities depository, clearing house and trade repository licence and a licensed exchange, licensed central securities depository, licensed clearing house and licensed trade repository must—
(a) maintain capital, together with retained earnings and reserves proportional to the risks relating to the functions or duties of the market infrastructure, in the Republic; and
(b) hold sufficient capital and liquid net assets funded by equity in the Republic—
(i) to cover potential general business losses to ensure that the market infrastructure is adequately protected against operational, legal, custody and investment risks so that it can continue performing its functions and duties as a going concern;
(ii) which should be determined by its general business risk profile and the length of time required to achieve an orderly winding-up or recovery, as appropriate, of the market infrastructure’s critical operations and functions under a range of stress scenarios;
(iii) which reflects a strong cash, cash-equivalent, or securities position to allow the market infrastructure to meet its current and projected operating expenses under a range of scenarios, provided that cash equivalents and securities consist of high-quality and sufficiently liquid assets that can easily be converted into cash at little or no loss of value, even in adverse market conditions;
(iv) which, is at a minimum, equal to six months of operating expenses, provided that the market infrastructure considers whether resources are required beyond that amount, taking into account its general business risk profile; and
(v) which is permanently available for the market infrastructure to absorb operating expenses or losses on a going concern basis;
(c) safeguard its assets to minimise the risk of loss or delay in access to these assets by holding the assets at supervised and regulated financial institutions that have robust accounting practices, safekeeping procedures, and internal controls that fully protect these assets; and
(d) have a viable plan, approved by its controlling body and updated regularly for raising additional equity should the equity fall below the amount required to cover all its operating expenses.

 

(2)

(a) A licensed exchange, licensed central securities depository, licensed clearing house and licensed trade repository must furnish the Authority with a quarterly report, or within such period as may be prescribed by the Authority, detailing the calculation of the required liquid financial resources, calculated in terms of this Regulation and the measures taken to obtain additional funding, if necessary.
(b) If, in the opinion of the Authority, such liquid financial resources are insufficient to cover the risks involved, the Authority may require the market infrastructure in question to obtain additional liquid assets funded by equity over a time period as determined by the Authority.