Default

Question 1

When shall a member in terms of the rules be regarded as being in default?

Answer 1

A member shall default if –
1. it is unable to meet its commitments to another member, the JSE, a JSE settlement system or a non-member,
arising out of a transaction or a JSE settlement system instruction; or
2. the JSE, in its sole discretion, considers that it has defaulted

Question 2

What are the rights of the JSE if a member has been declared to be in default and membership is provisionally
terminated?

Answer 2

1. The member will be suspended from trading;
2. Any amount payable by the JSE to the member shall be set off against any amount payable by the member
   including penalties
3. the member must hand over to the JSE –
   o such financial records of the member as the Director: Market Regulation deems necessary for the
   identification, protection and return of client assets and to facilitate the settlement of outstanding
   transactions in equity securities; and
   o the control of all client assets;

Question 3

In the case of a defaulting member, how should the JSE go about to procure the settlement of open transactions in
the first instance when buying in or selling out securities?

Answer 3

The JSE must first use any guarantees or margin provided by the defaulting members to settle open transactions when
buying in or selling out securities.

Question 4

If guarantees and margin are insufficient to cover the settlement of open transactions when buying in or selling out
equity securities, how will the JSE recover any loss or costs from the defaulting member? costs for payment of all the
costs of the proceeding?

Answer 4

The JSE will recover any loss or costs from a defaulting member by selling as many of the defaulting member’s
remaining equity securities as is necessary to realise an amount equal to the amount still owing to the JSE.

Question 5

If a member is declared to be in default, what are the duties of the Director: Market Regulation with regards to client
assets?

Answer 5

The Director: Market Regulation must ensure that:
1. Any client assets are identified as such and
2. Only unencumbered client assets are returned to the client