Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 1

Securities Systems* have a primary responsibility to their users** and other stakeholders. They must provide effective low cost processing. Services should be priced equitably.

* Securities Systems = depositories, settlement and clearing systems
** Users = customers of the securities system, and all other parties to whom the securities system owes a duty of care

1.	Is the board that governs the depository answerable to its users?	STRATE's board is in an unusual situation in that it comprises of all stakeholders in the market which also include all the shareholders. The Shareholders of STRATE are also users of the STRATE system. As a result of the board comprising of the users, STRATE's management is responsible to its users. The make-up of the Board is as follows: * 5 representatives of the JSE Securities Exchange South Africa (JSE) * 5 representatives of the Central Securities Depository Participants (CSDPs) 1 representative of the Issuers (CSIG - Company Secretaries Interest Group) 1 representative from the Fund Managers of South Africa (FMASA) 1 being the CEO of STRATE Ltd 1 being the independent Chairman of STRATE Ltd 2 being independent non-executive members of the Board * refers to Shareholders of STRATE Of the above, the CSDPs, the Issuers and FMASA are all users (buy-side and sell-side). In addition, the Financial Services Board (STRATE's regulator) has observer status on the Board. On the above basis, it could be said that the Board is very responsible to its users as it is made up of all its users.
2.	Does any single organisation, or sector (e.g. brokers, custodians, Stock Exchange) have a large voting position at the board of the depository?	The banking sector and Stock Exchange have equal voting rights of 5 each. The Fund Managers and Issuers have equal rights of 1 each. The remaining 4 votes are held by the CEO, two independent members (non-representatives of stakeholders), and the Chairman, thereby totaling 16 votes. Therefore, it can be seen that the JSE (JSE Securities Exchange South Africa) and the CSDPs each control 5 votes out of a total of 16.
3.	Is there cross subsidisation of products (e.g. international services subsidised by local ones or transaction costs subsidised by asset servicing charges)?	STRATE settles Equities and Warrants at the present time and there is no cross-subsidisation, each product falling within the same charging structure.
4.	What process is in place at the depository to ensure that it meets the needs of all its stakeholders (e.g. institutions, broker dealers, retail investors, issuers)?	STRATE has, since inception, adopted a policy of "consensus decisions". This has been achieved through STRATE's participation in multiple Work Groups, sub-committees and other consultative processes with the full range of stakeholders, comprising of equal representation. In addition, STRATE has conducted seminars and road shows, both locally and abroad, both to educate all the market players and to listen to suggestions to improve its methodologies. In terms of system enhancements, agreement is reached by the parties directly affected prior to commencement of development. In addition, the Board make-up ensures that no aspect of the market is ignored when important decisions are made.
5.	What is the communications strategy of the depository to its stakeholders and how is this run?	As stated in response 4 above, STRATE holds various forums to address issues raised by its stakeholders and to communicate developments, enhancements etc and is extremely open and transparent in its communications. Minutes are kept of all meetings. These are circulated to all participants. In addition, various sub-groups such as the Securities Forum (settlement function participants), the Brokers' Forum (member firms of the JSE) and many others, feed information both to their constituents and STRATE, ensuring a free dialogue between all parties. In addition, a monthly newsletter is distributed to the market regarding the latest developments in STRATE. Press announcements are made regularly publicising the latest developments and achievements. Directives are issued in special Gazettes to CSDPs.