Article
JSE procedures around storage operator failures
Published: 06/02/2023
According to recent JSE Market Notices, after a meeting with clearing members, financiers and fund
managers, the JSE is committed to considering the following improvements to
JSE-defined processes:
• Introducing a specific
time frame for the buyer to either access JSE stock or confirm with the storage
operator that good delivery was made; after this period, the ‘risk’ of good
delivery passes from the short- to the long-position holder.
• Guaranteeing all JSE
silo receipts and no longer look to each storage operator to guarantee the
receipts they issue. This could be solved by the JSE establishing a fund that
will underwrite all JSE silo receipts issued.
• If there is no turnover
of stock in a particular silo, the JSE requires additional product or financial
guarantees from the storage operator to ensure they can continue looking after
the stock and have sufficient resources to replace the stock, which will
experience natural quality deterioration over time.
Furthermore, that the following improvements were agreed to in
the Agricultural
Detailed Contract Specifications:
• Clarifying in the
detailed contract specifications the circumstances surrounding alternate
delivery and issuing receipts when quality and quantity are accessible (i.e.
should not issue a JSE receipt if the required grade can only be met after
screening or drying the product).
• Including a reference
to storage operators placed under business rescue (most likely including this
under the existing liquidation clauses).
The JSE is requested to consult sufficiently with the storage
sector before making commitments or finalising agreements that concerns the storage
sector.
The Market Notices can be accessed at the following links:
• Market Notice 580A/2022 JSE Procedures around a failure by a Storage Operator.
• Market Notice 580B/2022 Exploring the JSE Procedures around a failure by the Storage Operator.