South Africa’s OTC derivatives regulatory landscape is maturing, with key updates impacting both domestic and international market participants. These developments are part of South Africa’s implementation of global financial reforms aligned with the G20’s commitment to improving transparency and reducing systemic risk in the OTC derivatives market.
Some of the most important recent and upcoming changes to be aware of are as follows.
Strate granted trade data repository licence in December 2024
In a major step forward for South Africa’s financial market infrastructure, in December 2024 the Financial Sector Conduct Authority (FSCA) granted to Strate (Pty) Ltd, South Africa’s main central securities depository, a licence to operate as a Trade Data Repository (TDR).
As a TDR, Strate will be tasked with collecting, storing, and providing access to OTC derivatives trade data. Although the FSCA published a conduct standard outlining trade data reporting obligations in 2018, its commencement date has yet to be determined by the Prudential Authority (PA) of the South African Reserve Bank.
Now, with a licensed TDR in South Africa, market participants will be waiting to hear about the commencement date and will be eager to learn whether the reporting fields set out in the annexure to the conduct standard will be adjusted in line with the evolution of trade data reporting in other jurisdictions.
It is worth noting that with Joint Notice 2 of 2024, also released in December 2024, the PA announced it will require OTC derivative providers and financial institution counterparties to report certain margin information via its Umoja portal with effect from 1 April 2025, in line with the 2023 amendments to Joint Standard 1 of 2020 ‘Margin Requirements for Non-Centrally Cleared Over-The-Counter Derivative Transactions’. Trade data reporting to Strate will be in addition to reporting on the Umoja portal, so market participants will be looking to see some alignment in the two reporting streams.
Initial margin requirements – next phase-in September 2025
Another significant milestone on the horizon is the final phase of implementation of initial margin (IM) requirements for non-centrally cleared derivatives, scheduled for September 2025. This final phase will impose IM requirements on providers trading with counterparties, where both belong to groups that meet a threshold of the month-end average gross notional amount of OTC derivatives for March, April and May 2025 exceeding ZAR 100 billion. The phase will significantly expand the pool of institutions required to exchange IM, and the market is accordingly working to deadline.
General Laws Amendment Bill published in December 2024
On a related regulatory note, the South African General Laws Amendment Bill, introduced in December 2024, proposes a change to the recently implemented chapter 16 of the Financial Sector Regulation Act, 2017 (Resolution Framework) applicable to banks and certain other designated institutions.
In 2023, together with the announcement of the effective date of certain sections of the Resolution Framework, the PA released an Interpretation Note stating that it did not view section 166S (containing the write-down and cancellation powers of the Resolution Authority) as applying to master agreements as defined in section 35B of the Insolvency Act, 1936 (including ISDA Master Agreements, GMSLAs and GMRAs).
South African OTC derivative and securities finance market participants had expected an analogous amendment to the Resolution Framework to come through the long-awaited Conduct of Financial Institutions Bill (CoFI), but the amendment has instead appeared in the National Treasury’s General Laws Amendment Bill released in December 2024.
The National Treasury Media Statement regarding the Bill, together with a link to the Bill and commenting instructions can be found here. Comments are due to National Treasury by close of business on 6 February 2025.
Conclusion
The South African derivatives regulatory environment continues to mature, with necessary enactments and changes occurring regularly. We expect to see increased activity relating to trade data reporting and margin in the coming year.
