T+3 Market Steering Committee 01 July 2015 · SEP OCT NOV DEC JAN FEB MAR APR MAY JUNE JUL AUG SEP...

T+3 Market Steering Committee 01 July 2015

Brett Kotze

2

T+3 Project

Market Communication

The aim of the T+3 project

The primary aim of the T+3

project is to shorten the

settlement cycle for equities from

5 to 3 days

3

Phase 1 – Regulatory and Automation

Phase 2 – ECS go-live on T+5 Settlement Cycle

Phase 3 – Market on T3 settlement cycle

Phase Status

1 Implemented successfully - 22 July 2013

2 Implemented successfully – 20 October and 27 October 2014

3 Analysis in progress, commenced with development and iterative testing

May to July 2016 ready for go-live

Overview of the T+3 timeline Overall programme status

4

Functions per phase

Releases

Phase 1 (Regulatory and Automation) Phase 2 (ECS Go-live T+5)

• Split Brokers Prop and Controlled

• Client Pledge (electronic pledge to 3rd parties)

• SLB Automation to CSDP’s

• Corporate Actions Automation to CSDP’s

• ECS (First Phase – replacement of the equities clearing & settlement system)

• Deal Management

• Prime Broking

• Technology Roadmap Upgrade (ECS)

Phase 3 (ECS T+3 Implementation)

• ECS (Second Phase – functional migration to T+3)

• Change from T+5 to T+3 Settlement

• Fails Management Automation

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T+3 Update Timeline review and overall progress update

Phase 3 Timeline

2015 2016 2014

SEP JUNE MAY APR MAR FEB JAN DEC NOV DEC NOV OCT OCT SEP AUG JUL JUN MAY APR MAR FEB JAN JUL

SIT Cycle 1 Internal

UAT Cycle 1

Regression Cycle

SYT (7 iterations)

ECS Development

SIT Cycle 2 Internal

Scheduled to

start beginning

September

SIT Cycle 3

External

SIT Cycle 4

External

SIT Cycle 5

External

Scheduled to

start end Oct

Strate ready for testing on

new code base

September

4 C

SD

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teg

ratio

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Au

g –

Se

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3 C

SD

P’s

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teg

ratio

n

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d O

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1 C

SD

P r

ea

dy fo

r in

teg

ratio

n

Fe

bru

ary

UAT Cycle 2

User Training

Refresher Training

Ready for

go-live May –

July 2016

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T+3 Update Testing – market involvement

• Timing of phases:

• Required participation per phase:

• Pre-SIT Activities

• Initial reference data set-up

• Test pack review

• Per test cycle:

• Reference data review and health check (two days prior to test execution)

• Test pack refinement

• Test execution

• Results audit (2 days post test execution)

• Environment refresh (2 days prior to the next test phase)

SIT – Cycle 3 Scheduled to start

end Oct 2015

CSDPs (Voluntary)


mid Nov 2015

CSDPs (Compulsory)


mid Jan 2016

CSDPs (Compulsory) / Members (Voluntary)

UAT – Cycle 1 Scheduled to start

beginning Feb 2016

CSDPs & Members (Compulsory)

UAT – Cycle 2 Scheduled to start

end Mar 2016

CSDPs & Members (Compulsory)

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Go-live communication

After a large level of testing has been completed by affected parties a

narrower period for go-live will be announced

This is expected to be announced to the market in November 2015 after

System Integration Testing (SIT) has started and a level of testing

completed

The go-live dates will only be communicated after consultation with –

T+3 Market Steering committee

Clearing and Settlement Advisory Committee (CSAC)

The exact go-live date will be announced after first cycle of User

Acceptance Testing in 2016

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May

Ap

r

Mar

System Integration Testing Graphical Overview (Dynamic Testing)

FUNCTIONAL / TECHNICAL EXECUTION

2015 2016

Dec

No

v

Oct

Sept

Au

g

Feb

Jan

Ref.

Data

Alignm

ent /

Backu

p

21 - 28

Aug

Cycle 1 Internal (Incl.

Migration) 31 Aug – 22

Sep

Cycle 1 External

(Incl. Migration) 22 Oct – 18

Nov

Cycle 2 External

(Incl. Migration)

19 Nov – 11 Dec

Cycle 3 External

(Excl. Migration) 11 Jan – 03

Feb

Final Benchmarking and reporting 03 Feb – 15 April

LIMITED

TESTING

(b

ased

on

availability)

14

DEC

– 06

JAN

STRATE

23-Sep

Cycle 2 Internal (Incl. Migration) 23 Sep – 21 Oct

System Performance Testing (SPT) 25 Aug – 20 Oct

Integrated Performance Testing (IPT) 25 Nov – 02 Feb

9

09

06

05

04

03

02

System Integration Testing Graphical Task Overview

Integration Testing Cycle 3 (Migration Testing)

November

28

27

26

23

22

30

29

17

16

13

12

11

10

18

October

Development, Support and Training

Revert to backup B 22 – 23 Oct

Communicate Test Scenarios covered in

the cycles to the market

26 – 27 Oct

Settlement Cycle 1 (old)




Settlement Cycle 1 (new)







Convert batch (BCX/JSE)

(Internal JSE action) 03 / 04 Nov

Testing Audit, Market Meeting and cycle 4

adjustments. 17 – 18 Nov

Bug Fixing / Retest 17 – 18 Nov

Perform Health Checks

26 - 27 Oct (CA Events) LDT 02 Nov

(4 events)

(CA Events) LDT = 05 Nov

(4 events)

(CA Events) LDT = 09 Nov

(4 events)

10

07

04

03

02

01

30

System Integration Testing Graphical Task Overview

Integration Testing Cycle 4 (Migration Testing)

December

25

24

23

20

19

27

26

11

10

09

08

November

14


Revert to backup B 19 – 20 Nov



23 – 24 Nov












(Internal JSE action) 01 / 02 Nov

Perform Health Checks 23 – 24 Nov

BDA Year-end

11 Dec

(CA Events) LDT = 01 Dec

(4 events)

(CA Events) LDT = 03 Dec

(4 events)

Dummy Public Holiday 02 Dec

Testing Audit, Market Meeting and cycle 5

adjustments. 10 – 11 Dec

11

27

26

25

22

21

20

System Integration Testing (cont.) Graphical Task Overview

Integration Testing cycle 5 (Migration Testing)

February

15

14

13

12

11

19

18

02

01

29

28

January

03


Revert to backup B 11 – 12 Jan



13 – 14 Jan













(Internal JSE action) 21 / 22 Feb

BDA Month-end 29 May

Perform Health Checks 13 – 14 Jan

(CA Events) LDT = 20 Jan

(4 events)


(4 events)


(4 events)

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Entry and Exit Criteria System Integration Testing

Entry-Criteria

Market documentation reviewed and signed off

Agreed and signed off test packs

Internal and external stakeholders

Market Test Plan completed, reviewed and signed off

Data aligned across applications and all relevant backups are completed

Internal and external stakeholders

Infrastructure verification tests complete (including configuration and connectivity)

Applications and services are operational in the test environment across all applications – Participants to manage internally

No defects with severity of critical or high are open from previous phase

Deviation could occur under the following circumstances

The defect does not affect any key component within your application

The Project team in conjunction with the affected market participant agree to continue with state of defect

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Entry and Exit Criteria System Integration Testing

Exit-Criteria

All test procedures for a cycle is successfully executed by each market participant

Test results recorded in the agreed test management tool – Participants to manage internally

Screen shots, printouts, actual result, etc. attached to the test case in the test management tool - Participants to manage

internally

Approval for all test cases that are not executed i.e. deferred or not applicable is

quality assured by the Test Manager

All defects with severity of critical and high is fixed and retested during the cycle

Cycle will be extended, if required, to meet the above – Will be agreed by the market

Agreed resolution of all medium and low severity defects

Pass rate is greater than equal to a specified percentage

Pass rate is measured across all applications involved in the cycle

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Defect Management Process Defect Severity and Priority

Severity – the measure of impact upon the ‘Quality Characteristics’ of the system (e.g. Functionality, Operability etc.)

Priority – the measure of impact upon the test schedule, designates order in which defect

Level Description 1-Critical Impossible to continue testing

Must be corrected immediately The defect results in the failure of the complete software system, or of a subsystem, or of a software unit (program or

module) within the system.

2-High Must be corrected as soon as possible or the schedule will be impacted The defect hampers functionality therefore causes the system to produce incorrect, incomplete, or inconsistent

results. Significant business impact e.g. high financial impact

3-Medium The defect hampers the functionality to a very limited extent, is restricted to a small subset of system functionality,

and has no business impact and there is a work around in place therefore resolving the defect in this release is

negotiable.

4-Low The defect does not hamper the functionality of the system as described in the specification documents, has no impact on the application or business, and can be seen as a nice to have. Examples: different layout of a screen different font/format requested GUI related Correcting is not necessary in this release but may be considered for correcting in this or a subsequent release.

Priority Impacts to Testing 1 Severe impact to plan, cannot continue until fix supplied

2 Significant impact to plan, major areas of test cases awaiting fix to continue

3 Moderate/Low impact to plan, only single test case affected and awaiting fix to continue

4 Minor/No impact to plan, test can continue without fix

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T+3 Update Proposed training plan - brokers

• The following is the proposed plan for training – details will be confirmed in conjunction with

the T3 Marketing and Education Committee

• Timing - 2 training phases are envisioned:

• 1st phase in Jan 2016 for UAT participants and general market participants

• 2nd phase in Apr / May 2016 for general market participants and refresher training for Phase 1 trainees

• Structure:

• Entire programme lasts 6 hours - split into 2 modules (3 hours each)

• 2 x 3 hour sessions to be run each day (sessions will be alternated to give attendees flexibility)

• 5 total sessions to be run in the week - presentation style (auditorium)

• Planned training agenda:

1. Intro and T3 overview

2. T5 to T3 process changes

3. BDA changes demo

4. ECS changes demo

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5. Elective Events (Corporate Actions)

6. Fails Management

7. Migration week - Process

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TWG Sessions

The first of a series of Technical Working Group (TWG) sessions was set up with

brokers on Monday, 29 June 2015 to reconfirm the design of T+3 and impact to

brokers.

Brokers were requested to include their process engineers in the TWG so that they

can start working on the process changes in their back-office

Brokers were invited to request one-on-one sessions with the JSE, to facilitate

direct communication with back-office staff (and potentially traders)

As a proof of concept - the JSE would like to send 2 or 3 staff members into a

brokerage firm to work through and document their process changes. This will

be shared with other brokers – and potentially extended to other brokers

JSE will also extend the invitation for one-on-one sessions to CSDPs – where

JSE will present to the back-office staff on the impact of changes from T+5 to

T+3

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Design Sessions

Focused on reconfirming design for T+3 on critical areas, taking place in July

and August

Back-to-back links – JSE/Strate/CSDPs

Fails Management - JSE/Strate/CSDPs/brokers

Corporate Actions - JSE/Strate/CSDPs

Migration week – JSE/Strate/CSDPs/brokers

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Overview of the Phase 3 scope

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Functions changing / impacted JSE CSDPs JSE Equity Members

Strate Clients

T+5 to T+3 settlement and corporate action cycle (timeline changes)

x x x x x

Scrip Lending and Borrowing / Money Lending and Borrowing

x x

Terminating transactions BDA (Control clients and Brokers Prop)

x x x x x

Terminating transactions CSDP's (non-controlled) x x x x x

Failed Trade Management (ROS and FT) x x x x x

Margining x x

Prime Broking x x

These changes affect a number of systems

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Reducing the timeframe in which to conduct the existing processes and activities will result in quicker settlement

T+3 settlement cycle

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T+3 Update User Readiness - Planned comms events (cont.)

• Educational Materials:

• Description: User guides / brochures / manuals explaining the move to T3 and additional concepts contained therein

• Frequency: Multiple drops – July to November

• Purpose: To enhance the knowledge of participants impacted by T3, to enable them to transition to the shorter settlement cycle

• Planned content:

1. T+3 Guide – JSE (July)

2. T+3 FAQs – JSE (July)

3. T+5 to T+3 process timelines – JSE (July)

4. SLB Document – SASLA (July)

5. Corporate Actions Document – Strate (July)

6. Removal Process (Transfer Secs) – JSE (July)

7. SLB Tax Document – SASLA (Aug)

8. SLB Corporate Actions Document – SASLA (Aug)

9. Settlement Obligations Document – JSE (Aug)

10. Migration Document – JSE (Sept)

11. JSE & Strate Rules & Directives – JSE & Strate (Nov)

12. Fails Management Process (to include roles and responsibilities of SASLA & CSDPs) (Nov)

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T+3 Update User Readiness - Planned comms events (cont.)

• Roadshows / Conferences:

• Description: External presentations to stakeholders (local and foreign) regarding the T3 project

• Frequency: Multiple sessions

• Purpose: To allow impacted stakeholders not based in JHB to attend T3-focussed presentations and engage with project staff

• Planned schedule:

• July 2015 - Buy-side Roadshow (CT) and Namibian Stock Exchange visit

• October 2015 – SIBOS

• November 2015 - Buy-side Visit (CT) / NEMA Africa (LDN) / JSE Roadshow event (LDN)

• February / March 2016 – potential UK/USA roadshow (TBC)

• March / April 2016 – CT visit

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Current T+3 Committees

T+3 Market and Educational Committee

Purpose: to agree the approach and plan for all market-facing User Readiness activities

Current focus:

Review educational paraphernalia to be circulated to the market

Assist with setting up roadshows and meetings

T+3 Market Steering Committee

Purpose: to review market readiness and updates and agree any future steps

Project Managers

Purpose : to review milestones and updates

Test Managers

Purpose: agree and manage testing requirements

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External risks and Issues

Risk Risk Description Mitigation Risk Factor

External

External unforeseen (black swan events)

Unforeseen major events – the length of the program, geo political, economic or JSE industry factors – could change the landscape and affect T+3 viability and delivery

• Monitor the external environment for changes • Incorporate outcomes from stress testing and group

economics analysis • Accept residual risk in the event that a black swan

happens. We may be forced to focus senior resources on the resolution of the black swan event instead of T+3

Unanticipated regulatory demand

Any unknown legislative or regulatory changes might dilute focus and compromise market commitment

• Continuous monitoring of legislative and regulatory developments and assessing impacts as and when they arise

• Deferring changes where possible if they impact the T+3 project

Perception that the global precedent is moving

Global markets are moving to T+2, while South Africa is currently only implementing a T+3 cycle

• Continue to reinforce the reason why agreement was reached on a target of T+3 with both the FSB and the market

• Ensure delivery to target timeline to avoid delays (and circumventing further pressure to move directly to T+2)

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External risks and Issues

Risk Risk Description Mitigation Risk Factor

Market

Competing industry initiatives dilute focus and compromise market commitment

The JSE’s T+3 project is one of many concurrent industry initiatives. While the market has agreed to rank T+3 as the top priority industry initiative, they have warned that a delay in timelines will cause them to re-evaluate priorities and shift delivery focus to other projects.

• Ongoing engagement with market participants to ensure commitment. • High confidence planning to ensure on-time delivery

Market readiness / behavioral changes

There is a concern that the market and participants may not be ready for T+3 (i.e. brokers and fund managers have current processes based on T+5 and may not be prepared for T+3 processes) which will compromise go-live.

• User readiness activities include road shows, communication and educational documentation to be distributed to market participants. • Meetings are frequently being held with various stakeholders from the market to confirm progress on their systems and readiness in line with their planned schedules. • Extensive communication is underway to the market explaining the benefits of the move to T+3. • Early and regular engagement with clients during the course of the project. • Upfront consideration given to the technical impacts on clients.

Offshore market readiness

International investors that arbitrage trade in dual listed stocks on a T+2 cycle in the UK (and a T+5 cycle in SA) might not move shares between registers within the allocated time to meet the new settlement cycle requirements.

• Extensive communication and education about the move to T+3. • Work with transfer secretaries to identify and introduce more efficient processes for the removal of shares between markets. • Increase liquidity for securities lending and borrowing.

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Margin under T+3

Under T+3 settlement the JSE will margin at EOD T+1 (collect on morning

of T+2 respectively) – 35 to 40% of trades will be margined – figures

depending on how market practice will adjust

Margin will be retained in the case of Fails Management and returned on

final settlement of the transaction -

Rolling of Settlement

Retransactions

Compensation

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Change in practice

JSE has moved to real-time systems – members may do allocations on a

real-time basis on T and commits to flow on T

Market practice will change – Investors will send instructions and CSDPs

will commit on T or T+1

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Margining

EOD T+1

Proprietary - uncovered

Controlled Clients – no partials

Non-controlled - uncommitted

EOD T+2

• Proprietary

EOD T+3

• Failed Trades – ROS/FT – marked to market daily

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Questions

T+3 Market Steering Committee 01 July 2015 · SEP OCT NOV DEC JAN FEB MAR APR MAY JUNE JUL AUG SEP...

Documents

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