On 4 July 2014, the National Treasury (Treasury), the South African Reserve Bank and the Financial Services Board published proposed new regulations for unlisted over-the-counter (OTC) derivatives for public comment. 

The draft regulations are intended to bring South Africa's regulatory framework for unlisted OTC derivatives in line with changes implemented in other G20 jurisdictions. The draft regulations will enhance supervision of the South African OTC derivatives market by requiring that OTC derivative providers (ODPs) be authorised as a category of licensed person and will help to ensure financially sound and resilient central counterparties (CCPs). In addition, the draft regulations seek to promote transparency in the OTC derivatives market through a new regulatory regime relating to trade repositories (TRs). 

The Treasury identifies the following overarching principles that have played a key role in the drafting of the regulations:

  • the adoption of appropriate international standards;
  • the development of harmonised and equivalent regulatory frameworks;
  • alignment with existing legislation;
  • the implementation of the Twin Peaks model of financial regulation; and
  • the prevention of market disruptions.

In order to address the need to appropriately regulate the cross-border nature of securities markets, the draft regulations also set out the following:

  • requirements with which a central securities depository (CSD) must comply in order to be approved as an external CSD;
  • the securities services that may be provided by an external CSD and external clearing members; and
  • the functions and duties that may be exercised by an external clearing house, CCP or external TR.

The draft regulations are open for public comment (to be submitted to the Treasury) until 3 September 2014.