Operational Notice - South African Reserve Bank

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SA RESERVE BANKTable of contents1. Background ....................................................................................... 12. Types of open-market operations .................................................... 32.1 Repurchase transactions................................................................................ 32.2 Final square-off auctions ................................................................................ 42.3 The marginal lending facility............................................................................ 42.4 Reverse-repurchase transactions ................................................................... 52.5 Averaging of cash reserves............................................................................. 62.6 Reserve Bank debentures .............................................................................. 63. Eligible securities ...................................................................................... 73.1 List of eligible securities.................................................................................. 73.2 Definitions....................................................................................................... 84. Tender procedures for repurchase transactions ............................... 104.1 Announcement of auction and invitation for bids ............................................ 104.2 Submission of bids......................................................................................... 114.3 Acceptance of bids and announcement of results.......................................... 124.4 Valuation of securities and calculation of haircut............................................. 124.5 Maturity of repurchase transaction ................................................................. 144.6 Detail of underlying securities ......................................................................... 144.7 Delivery confirmation ...................................................................................... 144.8 Emergency procedures .................................................................................. 155. Delivery and settlement of securities5.1 Delivery .......................................................................................................... 165.2 Settlement...................................................................................................... 175.3 Repurchase of securities ................................................................................ 176. Margin maintenance .................................................................................... 186.1 Repurchase transactions................................................................................ 186.2 Reverse repurchase transactions.................................................................... 207. Legal and accounting framework .......................................................... 22AppendicesAppendix IAppendix IIAppendix IIIAppendix IVAppendix VAppendix VIAppendix VIITimetable for repurchase operationsExample of announcements on wire servicesRepurchase transaction formSupplementary/final clearing reverse repo formMargin transfer to the South African Reserve BankSouth African Reserve Bank debenturesSouth African Reserve Bank longer-term reverse reposOPERATIONAL NOTICE 1
SA RESERVE BANK1. Background1.1 This Operational Notice clarifies the procedures which will governparticipation in the South African Reserve Bank’s open-market operations.It should be read in conjunction with the Master Repurchase Agreement(Master Agreement) which is based on the International Securities MarketAssociation Agreement (ISMA Agreement) by which all transactionsreferred to in this Operational Notice are governed and which must besigned by all participants in the Reserve Bank’s repurchase and reverserepurchase transactions. In the event of any conflict between this Noticeand the Master Agreement, the latter prevails.1.2 The present refinancing facility, based on repurchase agreements (repos),was introduced by the Reserve Bank on 9 March 1998. Some refinementsto the system were, however, introduced on 5 September 2001.1.3 The repurchase/reverse repurchase market involves three very similar typesof transactions, namely the classic (or American style) repurchasetransaction, the buy/sell-back, and securities lending. Although the vastmajority of transactions referred to as “repos” in the domestic market arein reality buy/sell-backs (or carries), the repurchase/reverse repurchaseagreements entered into between the Reserve Bank and its counterpartieswill be conducted and booked on the basis of a classic money-market repowhere the cash taker (i.e. supplier or seller of the securities) retains the rightto any coupon payments. If a coupon payment relating to the stockinvolved in the specific repurchase transaction is made to the cash provider(i.e. buyer of the securities), such coupon receipts should immediately bepassed on to the cash taker. Failure to do so would constitute an event ofdefault.1.4 As prescribed by Regulation 16(12) of the Regulations Relating to Bankspublished in Government Gazette No. 21726, of 8 November 2000 issuedby the Minister of Finance in terms of section 90 of the Banks Act (No. 94of 1990), the seller shall continue to reflect an asset of which it had been theoutright owner sold by it in terms of a repurchase agreement as such anasset in its monthly balance sheet (form DI 100) opposite the relevant assetcategory, at the value at which that asset appeared in the accountingrecords of the seller prior to the sale thereof.1.5 The seller will, however, indicate that the said security is subject to arepurchase agreement with the buyer (counterparty) so as not to misleadpotential creditors or investors and because this accounting procedure isdesigned for practical and risk weighting purposes. The buyer will recordthe security as an asset in its books in the category “Securities underrepurchase agreements” until the seller repurchases the security inquestion.1.6 The Reserve Bank may from time to time amend this Operational Noticewhich should be regarded as a guideline for conducting open-marketoperations by the Financial Markets Department. The Reserve Bank willendeavour to give reasonable notice of any amendments, but reservesthe right to introduce any amendment with immediate effect, ifnecessary. The Reserve Bank may also vary the operational timetable or2 OPERATIONAL NOTICE
Page 1: Operational NoticePertaining to ope
Page 5 and 6: SA RESERVE BANK2.3 The marginal len
Page 7 and 8: SA RESERVE BANKAfrica. The issuing
Page 9 and 10: SA RESERVE BANKrepurchase auction,
Page 11 and 12: SA RESERVE BANKThe delivered securi
Page 13 and 14: SA RESERVE BANK7. Legal and account
Page 15 and 16: EXAMPLES OF ANNOUNCEMENTS ON WIRE S
Page 17 and 18: Appendix IIIREPURCHASE TRANSACTION
Page 19 and 20: Appendix VContact Name: ___________
Page 21 and 22: Appendix VIISOUTH AFRICAN RESERVE B

Operational Notice - South African Reserve Bank

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