Wave goodbye to your share certificates as JSE goes electronic

Published Feb 24, 1999


Take a last look at your share certificate: it's about to be dematerialised.

Dematerialisation is not part of a Star Wars revival, it's Johannesburg Stock Exchange-speak for the changeover from paper share certificates to electronic records of share ownership.

From July this year the stock exchange's S

hare TRA

nsactions T

otally E

lectronic (STRATE) project will start to transform the present paper system of share registration into an electronic system.

The switchover, says STRATE's Monica Singer, is designed to reduce the risk that your share certificate (also called scrip) will be stolen or copied, and to speed up the time between share deals and settlement.

At the moment, two weeks or more can pass between the day you sell your shares and the day you are paid. Once STRATE is up and running, settlement should take five days.

The need for electronic settlement is urgent, Singer says, because the huge growth in trading has flooded the settlement system with paper.

The number of trades on the Johannesburg Stock Exchange has leapt from about 2 930 in an average day in 1995 to 6 055 in 1997 and to a staggering 29 050 in June 1998. Electronic settlement should allow still higher volumes of trade while eliminating the risks of loss, theft or forgery of share certificates, says Singer.

In future, records of share ownership will be kept with Central Securities Depository Participants, which must be approved by the Financial Services Board and STRATE. Most of them will probably be banks.

You will be able to choose the Central Securities Depository Participant who will act on your behalf in all dealings with the Central Securities Depository and will send you a monthly statement of your investments. You will be able to change to another Central Securities Depository Participant if you choose.

Your relationship with your stockbroker will not change. You will still buy and sell shares through your stockbroker but when you sell shares, ownership will be transferred from you to the buyer at the touch of a computer key. Transfer of ownership and of cash will happen simultaneously.

The electronic custody of your shares will cost you nothing provided the shares are held in your own name.

But the bad news is that you will probably have to pay something for transactions. STRATE representatives say they can't be sure yet what the costs to you will be ­ it depends on the Central Securities Depository Participants and the stockbrokers.

The STRATE process will be launched in July and is due to be completed by the end of 2000. The system is modelled on the Swiss system, which has been in operation in Switzerland since 1993 and is also working in India.

It is being built to be free of the dreaded "millennium bug" which is expected to bring some computer systems grinding to a halt on January 1, 2000.

STRATE is being installed in phases and in time will be used to settle money market transactions and dealings in bonds, futures and options.


Dematerialisation is only necessary when you want to sell your shares. But you can bring your share certificate to your broker or bank for safe keeping before dematerialisation.

Once the system goes live later this year a schedule will be published showing which shares will be dematerialised each month.

The broker or Central Securities Depository Participant will dematerialise your shares then, capturing the information contained in the share certificate and your personal details on computer. You will be issued with a receipt.

The transfer of the scrip from paper to an electronic form will take at least 10 days from the time of your request. If you want to keep a copy of your certificate you can, but there will be a fee.


* You instruct your broker to buy or sell shares for you;

* Your share deal is done through the Johannesburg Stock Exchange's JET (Johannesburg Electronic Trading) system;

* STRATE tells the Central Securities Depository Participant (CSDP) that the deal has been done;

* You instruct your CSDP or broker to settle the transaction;

* Money moves between your bank and the bank of the buyer or seller of the shares; ownership of the shares is moved by the two Central Securities Depository Participants; and

* You receive your statement from your CSDP or broker.

Related Topics: