South African Derivatives Buyers to Set Aside Billions

(Corrects from first paragraph to show default fund is in addition to existing margins.)

South African derivatives clearing members and the Johannesburg Stock Exchange will set aside 500 million rand ($54 million) for a fund aimed at protecting banks from possible defaults.

Safcom, the clearing house for derivative contracts such as single stock futures, will set up a default fund where clearing members and the JSE will contribute additional cash, the bourse said in a statement today. The exchange currently calls for about 14 billion rand in margin to cover trading of 350 billion rand a day, the JSE said.

“The new fund reduces systemic risk as well as clearing members’ exposure to counter-party credit risk when clearing through Safcom,” Leila Fourie, director for post-trade services at the stock exchange, said in an e-mailed statement.

The fund’s introduction follows the 2008 financial crisis when Dealstream Securities Ltd., a South African derivatives broker, collapsed and FirstRand Ltd. (FSR), the country’s second- largest bank, lost money.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net