A cloud of uncertainty still hangs over the fees shareholders will have to
pay once the new electronic settlement system, Strate, is implemented on the
Johannesburg Stock Exchange (JSE).
Strate (Share Transactions Totally Electronic) involves the
"dematerialisation" of paper share certificates, or scrip, and their
replacement with an electronic register of shareholders.
The change-over to Strate has already started, with the dematerialisation of
Harmony in September. More shares will be brought gradually onto the system
next year and all shares on the JSE are to be moved to Strate by March 2001.
Dematerialising your shares will not cost you anything, provided you do it
within the time-frame set by Strate.
But it is still not clear how much it will cost you to effect a Strate
transaction.
Once Strate is fully up and running, you will still trade through a
stockbroker, but you will settle your transaction through one of the Central
Securities Depository Participants (CSDPs) authorised to keep electronic
registers of shareholders. Eight CSDPs have been appointed so far - Credit
Agricole, FNB, Standard Bank, Nedcor Bank, Absa, Societe Generale,
Mercantile Bank and Citibank.
So far only one of the CSDPs, Mercantile, has agreed to register clients in
their own name. Being registered in your own name means you will not pay
annual administration fees.
The company in which you are a shareholder will communicate directly with
you, sending you dividends and correspondence. Your settlement account will
be with the CSDP and you will be able to buy and sell shares through any
broker.
But if you are registered in the CSDP`s nominee account, you will have to
pay annual administration fees, as well as trading fees. This is because the
CSDP will communicate on your behalf with the company in which you hold
shares and charge you for the service.
If you work through a broker, you will automatically be in the broker`s
nominee account, and the broker will pay the CSDP fees and probably pass
them on to you. Your broker will process your transactions for you, taking
care of trading and settlement.
Just how much you`ll have to pay, though, has not yet been decided.
In the pilot phase, involving only Harmony shares, the CSDPs were to charge
between R40 and R90 per leg of each transaction.
Since, at the moment, each transaction has three legs, client to broker,
broker to broker and broker to client, each involving electronic messages,
this would have meant brokers paying up to R270 for each deal, plus a R25
cost applied by Strate to each leg. But under pressure from brokers and
faced with competition among themselves, some of the CSDPs agreed to cut
their costs in the pilot phase and Standard Bank agreed not to charge at
all.
Meanwhile, Strate announced that its own charges to the CSDPs may be cut.
These fees apply only to the pilot phase. Pat Simon, Strate`s training
manager, says costs should drop once the pilot phase is over, but he cannot
give details yet of what all this will cost the brokers and how much will be
passed on to their clients.
"Specific costs are difficult to quantify and are still being worked on.
Brokers and CSDPs will deal with each client according to their services and
the client`s requirements."
u For information on costs and fees (though not as they affect individual
investors), see the Strate website, www.strate.co.za