Strate performs a critical role in overseeing the distribution of funds in respect of corporate events (such as dividend and interest payments) for the equities, bonds and money market environments. This involves the efficient processing of multiple events throughout the year.
Statistically, in the equities environment alone, this equates to approximately 160 events with an average cumulative value of more than R20 billion a month. In terms of the current processing model, the funds due in respect of a particular event are paid, by the relevant issuer, into a Strate trust account used exclusively for this purpose. Once confirmation has been received from Strate’s banker that the necessary funds have been received and cleared, Strate authorises its banker to distribute the funds to the various CSD Participants for onward same day value to all the underlying shareholders.
This process has worked successfully for a number of years but, in the interests of further risk mitigation, this process has now been revised.
Under the new Equities Corporate Actions payment model, Strate will facilitate the creation of a settlement group involving all CSD Participants who are holding shares in that particular International Securities Identification Number (ISIN). The group is given a unique identification number and, on payment date, a payment instruction will be sent by Strate to the issuer’s appointed settling bank using that number.
That bank will fund a designated account at the central bank with the appropriate amount (again using the unique number provided to them). On receipt, these funds will be distributed by the central bank directly to the various CSD Participants for the onward transmission to their underlying clients. It is the issuer’s obligation to ensure that there are sufficient funds in their bank account by 09h00 on payment date. Should the issuer’s bank account fail to be funded by 14h30 on payment date, then the corporate action payment instruction will be formally cancelled. The payment date for the corporate action event will then be “rolled over” to the next business day or for a date announced by the issuer.
Very little change is required by issuers although it is important to note that the onus will be on each issuer to ensure that sufficient funds are available in their bank account prior to payment date, to allow their banker to make the payment timeously.
The issuer is requested to provide their Banker with a debit authority in respect of Equity Corporate Action event payments. Strate will be responsible for obtaining mandates from issuers for their bankers to accept and act on instructions received from Strate. It is therefore imperative for all Issuers to advise Strate of the following details:
- Bank Name
- Account Name
- Account Number
The above requested details can be e-mailed to email@example.com or firstname.lastname@example.org.
The deadline date to provide the above information is 30 August 2014.
The implementation timeline for the new the Equities Corporate Actions payments model is as follows:
- Scripted Market Testing 16 February – 20 March 2015
- Implementation Weekend 27 March – 29 March 2015
- Live in Production 30 March 2015