Johannesburg - The Johannesburg Stock Exchange has announced the launch of a shorter three-day settlement cycle, known as T+3. The South African market is now aligned with international best practice settlement standards.
Equities will now be delivered in exchange for payment in four days (T+3 = Trade plus three days) versus the previous six-day (or T+5 = Trade plus five days) settlement cycle, meaning that all trades traded today will settle this Thursday.
The JSE's T+3 project was initiated in 2013 and since then a three-phase process was implemented, which took place at national level and involved multiple test runs with all market participants. The move was spearheaded by the JSE in collaboration with the South African Reserve Bank, National Treasury, Financial Services Board and other stakeholders.
Dr Leila Fourie, Executive Director at the JSE said: "Based on the average daily figure of trading to the value of R25 billion, this is expected to create a release of R50 billion into circulation. Experience from other international exchanges indicated that we could potentially be looking at a 7 to 10 percent increase in liquidity, depending on current markets and other macroeconomic factors."
The JSE anticipates rolling of trades of between 5 and 10 percent in the new environment but is aiming to maintain a target of less than 5 percent, which is consistent with global best practice.