Country Focus

Preparing Corporate Treasurers for New, More Efficient Bond Market Settlement Processes The South African bond market will soon receive a new IT infrastructure for the custody and settlement of bonds, spearheaded by the country’s Central Securities Depository, Strate, to align with today’s best practices.

Preparing Corporate Treasurers for New, More Efficient Bond Market Settlement Processes



The South African bond market will soon receive a new IT infrastructure for the custody and settlement of bonds, changing some of the practices and processes that have been in existence since 1991, so as to align to best practices used today. 

The revolution is being spearheaded by the country’s Central Securities Depository, Strate, which owns the current bond settlement technology it had inherited from UNEXCor, following a merger between both parties in 2003. During 2017, Strate plans to implement its Debt Instrument Solution (DIS) project to replace the UNEXCor system, consequently introducing much-needed changes to the bonds settlement model, account structures within Strate, capital event payments and communication between issuers and Strate. 

The changes will also align with post-trade settlement practices currently used in the South African money market, as there are many synergies that stakeholders share in both markets. Corporate treasurers will need to understand what these changes mean for them and prepare for some of the new practices being introduced.

Introduction of an issuer agent

While there are no changes to the process with regard to the approval of an issuer and the programme memorandum, or the current listing or ISIN issuance process when communicating with the exchange, new roles within the Strate system are being introduced that impact issuers from a system connectivity or from a business process perspective. The introduction of the role of an issuer agent is vital, as it depicts an important way in which an issuer interacts with Strate. The new role, which currently exists in the money market environment, will be introduced to the bond environment so that inefficient manual processes can be eliminated and high levels of straight-through processing can be achieved. 

Issuers will need to appoint an issuer agent, which is an institution that acts on behalf of the issuer of securities, or become an issuer agent themselves. The one advantage is that many issuers may already have an issuer agent in their money market environment that already has the functionality developed to send confirmations of entitlements to Strate, for example, within seconds. Realising this, an issuer can easily appoint the issuer agent for their bond settlement activities and the same agent can communicate directly with Strate as the CSD. 

Should an issuer not have this automation, coupon and partial redemptions confirmations will need to be communicated electronically to Strate via the issuer agent via a centralised messaging front-end system, or CMFE. Privileged and confidential information sent over email, as per the UNEXCor processes, will soon be replaced and rather communicated timeously in a structured manner using SWIFT messages. Manual processes will be automated, reducing the risk of errors resulting from the manual capturing of information by various teams in the chain. The CMFE system also provides further benefits to clients in that it is only maintained and updated at Strate and clients don’t have to maintain an in-house system built to integrate with Strate, as they merely have to access the secure internet-based system via an online portal. Current bond market issuers will need to complete the requisite Strate forms which identify the appointment of an issuer agent, or become an issuer agent themselves. 

Automation of capital events

Another significant change is the move to automate the capital events payment process, processing the transactions through the South African Reserve Bank’s South African Multiple Options Settlement (SAMOS) System, as opposed to the Strate Trust account, which is a commercial bank account. Payments using central bank funds rather than commercial bank funds carry a much lower risk profile; and once the funds have been released into the SAMOS system, there will no longer be timing differences in respect of the receipt of funds, resulting in the faster distribution of proceeds to noteholders.

Rather than funding the account of the commercial bank of Strate, the issuer must fund the account at the settling bank, a direct participant in the Strate system, and instruct the bank to act on Strate`s funding request. The issuer is required to sign an agreement appointing their Settling Bank and send a copy of the agreement to Strate. 


The bonds implementation, or as it is widely known the DIS Project (Deb Instrument Solution project), forms part of a wider programme where Strate will replace its IT infrastructure for all asset classes. The implementation of money markets onto the new IT platform took place in February 2016, while the equities market will be switched over at later stages using a phased approach.

As multiple systems are consolidated into one, the new infrastructure will offer the market a streamlined service, as well as more innovative products in a much shorter time.


Corporate treasurers can contact Strate for assistance or further information by emailing or calling +27(0)11 759 5496/5314.

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