South Africa already eyeing up T+2 after successful T+3 rollout

T+3 transition lauded as major success with smooth migration and liquidity boost.
By Jonathan Watkins

The Johannesburg Stock Exchange (JSE) is already looking at aligning to T+2 settlement time after seeing the benefits of introducing T+3 last month.

Brett Kotze, head of operations at JSE, described the move as “one of the biggest successes in the last 20 years in South Africa”, adding that there were no glitches and no system impacts.

“T3 to T2 should be a simple transition,” he added. “T5 to T3 was difficult but T2 settlement cycle should be an easier transition.”

“We feel liquidity has increased by around 3-4%, but this could also be put down to market volatility which increases liquidity, although we feel there has been an increase of liquidity through T+3.”

All equities will now be delivered in exchange for payment in four days replacing the previous six-day cycle, which will see the South African market align with international best practice settlement standards.

First initiated in 2013, the T+3 project went through a three-phase process, which took place at national level and involved multiple test runs with market participants.

The project was fronted by JSE in collaboration with the South African Reserve Bank, National Treasury and Financial Services Board.

In a recent roundtable run by Global Custodian, participants heralded the arrival of T+3, with Bev Furman, executive director, CSD Operations at Strate, adding that the most remarkable thing was the week following the implementation. 

“We always said that the Thursday and Friday post-implementation was going to be the most challenging time, because that would be the last time you were settling T+5 trades concurrently with the first time you were settling T+3.

“By half past nine on the Thursday morning, we had settled not only the last T5s but also the first T3s and it’s been smooth sailing ever since.

“We’re cognisant of the amount of work that the market put into a project of this size, not only from the JSE and their brokers, but the CSDPs [CSD Participants] as well. We all had to pull together and it was, in our view, very successful.”