Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter I : Interpretation1. Definitions |
In this Regulation, "the Act" means the Financial Markets Act, 2012 (Act No. 19 of 2012), and any word or expression to which a meaning has been assigned in the Act, bears the meaning so assigned to it and, unless the context indicates otherwise—
means a company that controls, is controlled by, or is under common control with the clearing member or central counterparty;
"asset class"
means the underlying asset, security or event from which an OTC derivative derives its value, such as an interest rate, foreign exchange, credit, equity or a commodity;
"authorised OTC derivative provider"
means an OTC derivative provider authorised by the Authority under Regulation 2 and section 6(8) of the Act;
"basis risk"
means the risk that the relationship between the prices of similar but not identical commodities alters over time;
"client"
in relation to an OTC derivative provider, means any person, other than a counterparty, with whom an OTC derivative provider—
| (a) | executes an OTC derivative transaction; or |
| (b) | enters into a relationship with the intention of executing OTC derivative transactions; |
"complex product"
means a bespoke OTC derivative which combines two or more product types or embeds one or more derivatives into another;
"credit rating agency"
means a registered credit rating agency in terms of the Credit Rating Services Act, 2012 (Act No. 24 of 2012);
"credit risk"
means the risk that a counterparty will be unable to meet fully its financial obligations when due or at any time in the future.
"counterparty"
in relation to an OTC derivative provider, means—
| (a) | another authorised OTC derivative provider; |
| (b) | an authorised user; |
| (c) | a bank; |
| (d) | a person who is registered, licensed or authorised— |
| (i) | to administer a collective investment scheme Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002); |
| (ii) | to provide financial services in derivative instruments in terms of the Financial Advisory and Intermediary 2002 (Act No. 37 of 2002); |
| (iii) | to conduct long-term insurance business of the Long-term Insurance Act, 1998 (Act No. 52 of 1998); and |
| (iv) | to conduct short-term insurance business of the Short-term Insurance Act, 1998 (Act No. 53 of 1998); |
| (e) | a person outside the Republic who- |
| (i) | is authorised by a supervisory authority to perform a service or services similar to one or more of the services referred to in the definition of an OTC derivative provider or the services performed by an authorised user; or |
| (ii) | is registered, licensed, recognised, approved or otherwise authorised to conduct the business of a bank or to render services of a business referred to in paragraph (d) by a supervisory authority with functions similar to those of the Authority referred to in the legislation listed in paragraph (d); |
| (f) | a central bank or other national monetary authority of any country, state or territory; |
| (g) | a private equity fund; |
| (h) | any other person who elects, in writing, to be categorised as a counterparty and who is not— |
| (i) | a natural person; |
| (ii) | a pension fund organisation as defined in section 1(1) of the Pension Funds Act, 1956 (Act No. 1956); |
| (iii) | a friendly society referred to in the Friendly Societies Act, 1956 (Act No. 25 of 1956); |
| (iv) | a medical scheme or the board of trustees of such scheme as defined in section 1(1) of the Medical Schemes Act, 1998 (Act No.131 of 1998); and |
| (i) | any other person declared by the Authority to be a counterparty; |
with whom an OTC derivative provider executes an OTC derivative transaction or enters into a relationship with the intention of executing OTC derivative transactions;
"custodian"
means a person authorised by the Authority to hold assets, including securities, on behalf of another person and includes a nominee;
"external central securities depository link"
means a set of contractual and operational arrangements whereby the external central securities depository becomes a participant in the central securities depository to facilitate the transfer of securities between the participants for settlement services;
"financial reporting standards"
means such reporting standards as may be issued from time to time by the Financial Reporting Standards Council in terms of the relevant provisions of section 440 of the Companies Act, 1973, or section 29 read with section 203 of the Companies Act, 2008;
"group"
means a group of companies as defined in the Companies Act;
"indirect clearing"
means clearing services provided by a clearing member to an indirect clearing client, through a set of contractual arrangements between the central counterparty, the clearing member and the indirect clearing client;
"indirect clearing client"
means a clearing client of a clearing member whose transaction is cleared through the central counterparty, using the clearing services of a clearing member;
"operational risk"
means the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events, including legal risk such as exposure to fines, penalties, or punitive damages resulting from supervisory actions and private settlements, but excludes strategic or reputational risk;
"OTC derivative"
means an unlisted derivative instrument that is executed, whether confirmed or not confirmed, excluding—
| (a) | foreign exchange spot contracts; and |
| (b) | physically-settled commodity derivatives; |
and "OTC derivative transaction" has a corresponding meaning;
"OTC derivative provider"
means a person who as a regular feature of its business and transacting as principal—
| (a) | originates, issues or sells OTC derivatives; or |
| (b) | makes a market in OTC derivatives; |
"product type"
means a sub-category of an asset class;
"related party"
in relation to a person (the "first person") means a person connected to the first person in a manner described in section 2(1)(a), (b) or (c) of the Companies Act;
"reserves"
means appropriation of retained earnings for a designated purpose which is not available for dividends to the shareholder which is of a permanent nature and able to fully absorb losses in going concern situations;
"unfunded credit-derivative instrument"
means a contract in terms of which the protection seller does not provide collateral to a protection buyer for the settlement of the protection seller's potential future obligations;
"valuation"
means the current market value or net present value of an OTC derivative transaction; and
"value date"
means the day on which the payment, transfer instruction, or other obligation is due and the associated funds and securities are available.