South Africa's regulators want the country's privately traded derivatives pushed through a central clearing house, and the Reserve Bank has told Bloomberg the final rules should take effect by 2028.
A derivative is a contract whose value depends on something else, usually an interest rate or a currency. Most of them here are arranged privately between two parties, which means that if one side collapses the other is left holding the loss on its own. A clearing house stands in the middle of both sides instead. It takes collateral from each of them and absorbs the damage when one cannot pay. That is the whole point of the exercise.
What is being proposed
The Prudential Authority and the Financial Sector Conduct Authority published a joint discussion document on 7 April setting out which contracts should be caught. It works off the Financial Markets Act of 2012, which lets the two authorities decide using factors such as how standardised a product is, how much of it trades and how easily it can be traded. Rand interest rate swaps and forward rate agreements are proposed as the first instruments, with more to be added in phases as industry feedback and market data come in. Comments closed on 5 June.
The work sits inside South Africa's Group of Twenty commitments and follows a roadmap the two authorities issued in February 2022. The first phase, a standard for licensing a local clearing house, is finished. The second built a route for foreign clearing houses and trade repositories to operate here, with some concessions on the rules.
One clearing house, and it does not cover this
The Reserve Bank named its own obstacle in the same statement. None of this binds anybody until a suitable clearing house is licensed and running, and South Africa has licensed exactly one. That is JSE Clear, and only for derivatives listed and traded on the Johannesburg Stock Exchange.
The market it would eventually have to handle is worth more than R150 trillion, or about $9.3 trillion, on the central bank's own numbers. Before the final rules arrive, the two authorities plan to publish a standard for consultation between April 2027 and March 2028, along with a draft naming the products to be considered and the criteria for catching them. That leaves a consultation running into 2028, a market measured in hundreds of trillions of rand, and one licensed clearing house that covers none of it.
