South Africa’s financial regulators plan to require central clearing for certain over-the-counter (OTC) derivatives, with final rules expected to take effect by 2028, the South African Reserve Bank (SARB) said in an emailed response to Bloomberg questions.
What regulators propose
The Prudential Authority (PA) and the Financial Sector Conduct Authority (FSCA) have published a discussion document that outlines eligibility criteria for central clearing. The paper recommends that rand-denominated interest-rate swaps and forward-rate agreements be phased in first as mandatory centrally cleared instruments. Additional products would be assessed and added through a structured, phased approach based on market data and industry input.
“It is envisaged that the final rules will come into effect by 2028,”
SARB said the ability of market participants to comply will depend on the licensing and operational readiness of an appropriate central counterparty (CCP). To date, South Africa has licensed one CCP for listed derivatives, the bank noted.
Scope and timing
Regulators noted that rand-linked OTC derivatives traded both onshore and offshore exceed R150 trillion in notional value. The joint plan sets out a timeline for further consultation and rule-making:
- Comments on the PA/FSCA discussion document closed on 5 June.
- The PA and FSCA plan to issue a joint standard for consultation between April 2027 and March 2028.
- A draft joint determination identifying the initial products for mandatory central clearing will accompany that standard.
The proposed standard will also define the eligibility criteria for OTC derivative transactions that should be centrally cleared.
Why regulators are acting
Internationally, post-crisis reforms have pushed jurisdictions to centralise and standardise clearing of certain OTC derivatives to reduce counterparty risk and raise transparency. South Africa adopted a phased road map in 2022 to implement a mandatory central clearing framework in line with Group of Twenty commitments.
The PA and FSCA said central clearing for eligible OTC contracts would increase transparency and improve the resilience of the financial system to shocks. Regulators have been reviewing market structures to limit the threat of a disorderly counterparty failure that could amplify instability.
| Item | Planned timing |
|---|---|
| Comments on discussion document | Closed 5 June |
| Joint standard consultation | April 2027–March 2028 |
| Expected effective date for final rules | By 2028 |
Implications for market participants
Market participants will need to prepare for:
- Potential onboarding to a licensed central counterparty and changes to collateral and margining practices;
- Operational adjustments to meet mandatory clearing requirements for in-scope products;
- Possible phased expansion of the rule to other derivative classes following data-driven assessment and industry feedback.
SARB cautioned that the final timeline for compliance hinges on the licensing and operationalisation of a suitable CCP. The central bank said regulators will publish further details, including a draft determination of products to be centrally cleared, as part of the consultation planned for 2027–28.
Regulatory action in this area will be watched closely by banks, asset managers, pension funds and the broader derivatives market, given the size of the exposures and the potential effects on liquidity, capital requirements and market infrastructure.
Developments are still unfolding. Officials said further consultative documents and draft determinations will be released before final rules are promulgated.
