a detailed study on workings of the johannesburg stock exchange

8/8/2019 A Detailed Study on Workings of the Johannesburg Stock Exchange

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A DETAILED STUDY ON WORKINGS OF THE JOHANNESBURG

STOCK EXCHANGE (J.S.E)

PROJECT REPORT

Project report submitted in partial fulfillment of the requirement of

South Asia University for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

2010

Submitted By

NAME :JAMES K. SIRYA

ENROLMENT NO :

Under the guidance of

Dr. Nirmal Kumar. R. T M.Com.,M.B.A.,AMIBM.,Ph.D.,

SOUTH ASIA UNIVERSITY

LONDON


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GEMS B SCHOOL

PONDICHERRY

CERTIFICATE

This is to certify that project entitled A DETAILED STUDY ON WORKINGS

OF THE JOHANNESBURG STOCK EXCHANGE (J.S.E) is submitted by

JAMES K. SIRYA ENROLMENT NUMBER -

GEMS B SCHOOL, PONDICHERRY in partial fulfillment of the first trimester

Requirement in Financial Management for the award of the degree Master of

Business Administration and is certified to be an original and bonafide work.

PLACE : Guide Signature

DATE :


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ACKNOWLEDGEMENT

I am indebted to all powerful almighty God for all the blessings he showered on me and

For being with me throughout the study.

I also express with great pleasure and sincerity to record my thanks, gratitude

And honor to Mr. L. Alphonse Liguori-Managing Director, Mr. M. Tamijuddin-Director

Academics, Ms.Marudam-Student Relations Executive for their valuable advice and

For timely help concerning various aspects of project.

I place on record my sincere gratitude and appreciation to my project guide

Dr. NIRMALKUMAR.R.T for his kind co-operation and guidance which enable me to

Complete this project.

I take this opportunity to dedicate my project to our loving faculty

Dr. NIRMALKUMAR.R.T who was a constant source of motivation and I express my deep

Gratitude for his never ending support and encouragement during this project.

Finally I thank each and every one in my family and friends who helped me to complete

this project.

DATE : JAMES K. SIRYA


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EXECUTIVE SUMMARY

This study aims at study the working of Johannesburg stock exchange (J.S.E).

Accordingly the research design was prepared adequate literature survey was made.

Secondary data was collected through the internet.

After the collection of secondary data analysis was made to. Accordingly it was found that

Johannesburg stock exchange (J.S.E) has made rapid strides in the capital market.

Innovation has taken place in by way of a lot of regulatory and control measures have been

implemented in the exchange.


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CHAPTERS TITLE PAGE

ACKNOWLEDGEMENT 3

EXECUTIVE SUMMARY 4

CHAPTER-1 INTRODUCTION 7

1.1 AN OVERVIEW OF JOHANNESBURG STOCK

EXCHANGE

1.2 NEED OF THE STUDY

1.3 OBJECTIVES OF THE STUDY

1.4 PERIOD OF STUDY

1.5 RESEARCH METHODOLOGY

1.6 LIMITATION OF THE STUDY

CHAPTER-2 CORPORATE GOVERNANCE 24

2.1 CHAIRMAN AND BOARD OF DIRECTORS

2.2 PHILOSOPHY

2.3 RISK MANAGEMENT

2.4 SUSTAINABILITY


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CHAPTER-3 PRODUCTS OF JOHANNESBURG STOCK

EXCHANGE 39

CHAPTER-4 BOARD CHARTER 43

CHAPTER-5 ANNUAL REPORT OF JOHANNESBURG STOCK

EXCHANGE 65

CHAPTER-6

6.1 CONCLUSIONS 212

BIBLIOGRAPHY 213


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INTRODUCTION

AN OVERVIEW OF THE JOHANNESBURG STOCK EXCHANGE.

The JSE Limited ("the JSE") was formally established on 8 November 1887. It was borne of

the needs of a rapidly developing gold mining industry and has emerged as an active playerin meeting both the political

And economic challenges of post apartheid South Africa.

The JSE is licensed as an exchange under the Security Services Act, 2004 and Africas

premier exchange.

It has operated as a market place for the trading of financial products for nearly 120 years.

In this time, the

JSE has evolved from a traditional floor based equities trading market to a modern

securities exchange

Providing fully electronic trading, clearing and settlement in securities, financial and

agricultural derivatives

And other associated instruments and has extensive surveillance capabilities. The JSE is also

a major

Provider of financial information. In everything it does, the JSE strives to be a responsible

corporate citizen.

Company profile overview

There are a number of stock exchanges in Africa, most of whom are very small by world

standards. The JSE Securities Exchange South Africa (JSE) in South Africa is the largest and

most developed bourse on the continent.

The JSE Ltd is a key part of South Africas economic landscape. As South Africas only full service

securities exchange, we connect buyers and sellers in a variety of different financial markets,

namely equities, equity derivatives, agricultural derivatives and interest rate instruments.

They are the market of choice for local and international investors looking to gain exposure to

the leading capital markets in South Africa and the broader African continent. The JSE also

enables companies to access to both debt and equity capital through its interest rate market,Yield-X and its equity Main Board and the Alternative Exchange (AltX).

A respected brand associated with market integrity, we are regarded as a mature, efficient,

secure market with world class regulation, trading, clearing, settlement assurance and risk

management.


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THEY PROVIDE MARKETS FOR TRADING IN:

Equities (JSE Main Board, Africa Board and AltX)

Equity derivatives (SAFEX)

Commodity derivatives (SAFEX)

Interest rate products (Yield-X)

Our main lines of business are:

Issuer services

Trading

Clearing and settlement

Technology and related services

Information product sales


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ORGANIZATION STRUCTURE

The JSE's operations are conducted out of the following divisions:

Agricultural Products

Company Secretariat

Clearing & Settlement

Education

Finance

Government and International Affairs

Human Resources

Information Product Sales

Information Services

Issuer Services

Marketing and Business Development

Operations and Services

Strategy and Legal Counsel

Surveillance

Trading


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HISTORY OF THE JOHANNESBURG STOCK EXCHANGE.

1887 The JSE is established as a stock exchange.

1947 The first legislation applicable to the operation of exchanges is introduced with theStock Exchanges Control Act.

1963 JSE becomes a member of the World Federation of Exchanges.

1978 The JSE achieves a market capitalization of R51 billion, eight times the market size

in 1961 a record for the JSE.

1979 Krugerrands are officially listed.

1995 Substantial amendments are made to the legislation applicable to stock exchanges

which result in the deregulation of the JSE through the introduction of limited liability

corporate and foreign membership. The South African Institute of Stockbrokers is

formed to represent, train and set standards for the qualification of stockbrokers. In

December, the market capitalization exceeds R1 trillion for the first time.

1996 The open outcry trading floor is closed on 7 June and replaced by an order driven,

centralized, automated trading system known as the Johannesburg Equities Trading

(JET) system. Dual trading capacity and negotiated brokerage is introduced. The value of

shares traded annually reaches a new record of R117.4 billion and the new capital raised

during the year reaches R28.4 billion.

1997 SENS (Securities Exchange News Service known then as Stock Exchange News

Service), a real time news service for the dissemination of company announcements and

price sensitive information, is introduced. SENS ensures early and wide dissemination of

all information that may have an effect on the prices of securities that trade on the JSE.

1999 In January, the new Insider Trading Act is introduced based on recommendations

made by the King Task Group on Corporate Governance, which included representatives

from the JSE. The JSE establishes, in collaboration with South Africas four largest

commercial banks, the electronic settlement system, STRATE, and the process to

dematerialize and electronically settle securities listed on the JSE on a rolling,

contractual and guaranteed basis is initiated.

2000 The JSE successfully lists Satrix 40, the JSEs first exchange traded fund, which

tracks the top 40 companies listed on the JSEs Main Board.

2001 The JSE acquires SAFEX, the South African Futures Exchange, and becomes the

leader in both equities and equity and agricultural derivatives trading in the South

African market. The JSE enters into a joint venture with GL Trade SA to provide an


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2004 The JSE launches the Socially Responsible Investment (SRI) Index, which measures

compliance by companies with triple bottom line criteria around economic,

environmental and social sustainability.

2005 The JSE launches Yield-X, its market for a wide range of interest rate products. This

world-first allows for the trading of both spot and derivative interest rate products onone platform with multi-lateral netting across all products. The JSE demutualises and

incorporates in South Africa as JSE Limited, a public unlisted company on 1 July 2005.

Existing rights holders of the JSE become its first shareholders and for the first time in

the JSEs history, a person who is not an Authorized User of the JSE or a stockbroker can

obtain an ownership interest in the JSE. Immediately on demutualization, JSE rights

were converted into JSE Shares and each rights holder received 1 000 JSE Shares for

every 1 JSE right held. This resulted in the JSE having an authorized share capital of R40

million made up of40000000 ordinary shares of R1.00 each, of which 8 340250

ordinary shares were issued to previous rights holders. Over the counter trading in JSE

Shares commences with settlement of the trades occurring through STRATE.

2006 In June 2006 the JSE Ltd lists on the Main Board


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JSE EXECUTIVE COMMITTEE

JSE Executive Committee

Russell Loubser

CEO of the JSE

Board of Directors of the World Federation of Exchanges; Previous

Chairman of the World Federation of Exchanges Working Committee;

Past Chairman of SAFEX; Previous Executive Director of financial

markets at Rand Merchant Bank Limited.

Appointed to the Board in 2000

NickyNewton-King

Deputy CEO

Member of the King Task Group into Insider Trading, the Financial

Markets Advisory Board, the Financial Centre for Africas Strategy

Committee and the Standing Advisory Committee on Company Law;

Previous Partner of Webber Wentzel Bowens Attorneys.


Leanne Parsons

Chief Operating Officer

Director of JSE Related Companies


John Burke

Executive Director of the JSE

Member of the King Committee on Corporate Governance; Chairman of

the Listings Advisory Committee


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Freda Evans

Chief Financial Officer

A founder member of XBRL South Africa. Appointed a member of the

XBRL Advisory Committee (XAC) to the IASC.

Appointed to the Board in 2007.

Geoff Rothschild

Director: Government and International Affairs

Ana Forssman

Senior General Manager: Information Product Sales

Shaun Davies

Director: Surveillance

Allan Thomson

Director: Derivatives Trading


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Rod Gravelet-Blondin

Senior General Manager: Commodity Derivatives

Mpuseng Moloi

Senior General Manager: Human Resources

Des Davidson

Director: clearing & Settlement

Jannie Immelman

Senior General Manager: Information Services

Maureen Dlamini

Senior General Manager: Education/Executive Head - Africa Board

Noah Greenhill

Senior General Manager: Marketing and Business Development


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Gary Clarke

Group Company Secretary to the JSE

Riaan van Wamelen

Chief Information Officer

Board of Directors of the World Federation of Exchanges; Previous Chairman of the WorldFederation of Exchanges Working Committee; Past Chairman of SAFEX; Previous Executive

Director of financial markets at Rand Merchant Bank Limited.


Nicky Newton-King

Deputy CEO

Member of the King Task Group into Insider Trading, the Financial Markets Advisory Board,

the Financial Centre for Africas Strategy Committee and the Standing Advisory Committee

on Company Law; Previous Partner of Webber Wentzel Bowens Attorneys.

Leanne Parsons

Chief Operating Officer

Director of JSE Related Companies



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John Burke

Executive Director of the JSE

Member of the King Committee on Corporate Governance; Chairman of the Listings

Advisory Committee


Freda Evans

Chief Financial Officer

A founder member of XBRL South Africa. Appointed a member of the XBRL Advisory

Committee (XAC) to the IASC.

Appointed to the Board in 2007.

Geoff Rothschild

Director: Government and International Affairs

Ana Forssman

Senior General Manager: Information Product Sales


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CompanyName:

JSE Limited

RegistrationNumber:

2005/022939/06

Registeredoffice:

One Exchange Square2 Gwen LaneSandown2196

Postal address:Private Bag X 991174Sandton2146

Transfersecretary:

STRATE1st Floor9 Fricker RoadIllovo, Sandton

Reportingaccountantsand auditors:

KPMG Inc85 Empire RoadParktown, 2193

Sponsor andJoint Financial

Advisor:

Rand Merchant Bank(A division of FirstRand Bank Limited)

One Merchant PlaceCorner Fredman Drive and Rivonia RoadSandton, 2196

Joint FinancialAdvisor:

Morgan Stanley South Africa (Pty) Ltd1st FloorSouth West Wing160 Jan Smuts AvenueRosebank, 2196South Africa

Banker: First National Bank(A division of FirstRand Bank Limited)4 First PlaceBank CityCorner Pritchard and Simmonds StreetJohannesburg


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The JSE Ltd is a key part of South Africas economic landscape. As South Africas onlyfull service securities exchange, they connect buyers and sellers in a variety of differentfinancial markets, namely equities, equity derivatives, agricultural derivatives andinterest rate instruments.

They are the market of choice for local and international investors looking to gainexposure to the leading capital markets in South Africa and the broader Africancontinent. The JSE also enables companies to access to both debt and equity capitalthrough its interest rate market, Yield-X and its equity Main Board and the AlternativeExchange (AltX).

A respected brand associated with market integrity, they are regarded as a mature,efficient, secure market with world class regulation, trading, clearing, settlementassurance and risk management.

They provide markets for trading in:

y equities (JSE Main Board, Africa Board and AltX)y equity derivatives (SAFEX)y commodity derivatives (SAFEX)y interest rate products (Yield-X)

Their main lines of business are:

y issuer servicesy tradingy clearing and settlementy

technology and related servicesy information product sales


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NEED OF THE STUDY

The stock market is a place where capital formation takes place. Its needless to say that South

Africa is fast emerging as a global economy and a lot of economic changes are taking place.

At this juncture its imperative to study the working of that exchange because in the word ofMilton Freidman the stock market mirrors the economy of the country.


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OBJECTIVES

The objectives of the study are as follows.

A. An overview of (J.S.E) Johannesburg stock exchange.

B. Corporate governance of Johannesburg stock exchange

C. Products of Johannesburg stock exchange

D. Board of charter of Johannesburg stock exchange

E. Annual report of Johannesburg stock exchange


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PERIOD OF THE STUDY

The period of the study is limited to a span of 3months


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RESEARCHMETHODOLOGY

Research methodology is a very important aspect of any research. The research design of the

project is as follows.

A. Literature survey

B. Collection of secondary data

C. Analysis of the data

Secondary data has been assiduously collected. In short the research design has been closely

followed for the project.


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LIMITATIONS OF THE STUDY

Its hereby stated that the study was conducted for a span of 3months and as a result the

inferences and conclusions are slightly biased due to the constraint of short time span.


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By virtue of its regulatory role, it is essential for the JSE to maintain the clear distinction

between that role and its role as a listed entity. This requires the JSE to be rigorous in

implementing governance processes and procedures that realize and maintain the

unquestionable separation of these different functions.

The principles of conducting business with integrity and according to sound governance

practices are ingrained at the JSE, and the JSE continues to review its governance

structures in accordance with local and international developments.

With the listing of the JSE on 5 June 2006, the Board of the JSE has intensified its

commitment to the values of good corporate governance in ensuring that better than

good governance persists at and permeates all levels of the JSE, resulting in the

fortification of the JSE brand.

The Board is satisfied that the JSE has made and continues to make every practicaleffort to conform with the King Code in all material aspects.

Chairman and board of directors

The JSE has a unitary Board consisting of a majority of non-executive directors

presided over by a chairman elected from the non-executive directors. The Board

consists of 14 directors (2005: 15), who, in addition to the Chairman, consists of a Chief

Executive Officer (CEO), Deputy CEO, Chief Operating Officer, two other executive

directors, a lead non-executive director and eight other non-executive directors. In the

interests of transparency, a representative from the JSEs regulator, the FinancialServices Board, attends Board meetings as an observer.

Non-executive directors have no fixed term of appointment. However, in terms of article

24 of the Articles of Association of the JSE, at least one third of all directors (with the

exclusion of the CEO) are required to retire by rotation each year. Retiring directors may

be re-elected. In addition, executive directors are subject to the same terms and

conditions of employment as other JSE employees, with the exception of their notice

period, which is three months. The CEOs notice period is four months.

The composition of the Board allows for appropriate and efficient decision making and

ensures that no one individual has undue influence over the said process.

The responsibilities of the Board are set out in more detail in the Board Charter which

was approved by the Board on 25 November 2003 and can be found at www.jse.co.za.

The ongoing relevance and applicability of the Charter is assessed on an ongoing basis


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and changes made where appropriate.

The Board considers all its non-executive directors to be independent. A number of the

non-executive directors have indirect remote interests in the JSE, and might therefore

fall outside of the definition of independent as set out in the King Code and JSE listing

requirements. These directors and their interests are: Humphrey Borkum, Chairman of

Merrill Lynch South Africa (Pty) Limited sponsor and member of the JSE; Stephen

Koseff, Chief Executive Officer of Investec Bank Limited listed company, sponsor and

member of the JSE; Andile Mazwai, Chief Executive Officer of BJM Securities (Pty)

Limited listed company, sponsor and member of the JSE. The Board is mindful of this

and the potential conflicts of interests that might arise as a result, however remote. A

process has been implemented to mitigate any such conflicts.

The directors are elected to the Board on the basis of their skills and experience

appropriate to the strategic direction of the JSE and necessary to secure its soundperformance. The race and gender of candidates is also considered. Procedures for the

nomination of Board members are formal and transparent. The Board has delegated

this responsibility to a Nominations Committee which makes recommendations to the

Board.

The powers of the Board are conferred upon it by the Securities Services Act, No. 36 of

2004, the rules of the JSE made in terms of this legislation, and the JSEs Memorandum

and Articles of Association. Article 28 of the Articles of Association of the JSE vests the

management and control of the JSE in the Board.

The Boards primary responsibilities, based on an agreed assessment of levels ofmateriality, include giving strategic direction, identifying key risk areas and key

performance indicators of the business, monitoring investment decisions, and

considering significant financial matters.

This committee is comprised of the CEO and the heads of the various JSE divisions. Itis primarily responsible for the operational activities of the JSE and for the development

of strategy and policy proposals for consideration by the Board. The committee is alsoresponsible for implementing Board directives.

The committee meets weekly, and operates in terms of written terms of referenceapproved by the Board.


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Russell Loubser

CEO

Nicky Newton-KingDeputy-CEO, Strategyand Legal Counsel

Freda EvansCFO, Finance

Leanne ParsonsCOO, Operations andServices

John Burke

Issuer Services

Geoff RothschildGovernment and

International Affairs

Rod Gravelet-Blondin

Agricultural Products

Mpuseng MoloiHuman Resources

Des Davidson

Clearing and Settlement

Jannie ImmelmanInformation Services

Maureen Dhlamini

Education

Noah GreenhillBusiness Development

and Marketing


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Ana ForssmanInformation ProductSales

Shaun Davies

Surveillance

Allan ThomsonTrading

Gary ClarkeCompany Secretariat

Riaan van Wamelen

Chief InformationOfficer, ITU

Graham SmaleDirector: Interest RateProducts


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Below is a summary of our committee structure and membership information.

Chairperson Member

AuditCommittee

Human

ResourcesCommittee NominationsCommittee

Risk

ManagementCommittee

Humphrey Borkum

Anton Botha

Bobby Johnston

David Lawrence

Russell Loubser

Wendy Luhabe

Andile Mazwai

Sam Nematswerani

Leanne Parsons

Nigel Payne

Gloria Serobe

NOTE: Bill Urmson (Dir of Surveillance), Freda Evans (CFO) & David Lawrence sit onthe Risk Management Committee


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PHILOSOPHY

The JSE values integrity, business ethics and customer needs and is committed to

ensuring that these are sustained in its operations and interaction with clients andstakeholders. The JSE in turn expects all employees to embrace these values andreflect them in their day-to-day interaction amongst themselves and clients. In order torealize this commitment the JSE has adopted a code of conduct (extracts from whichare set out below).

STANDARDS

Corporate and Media RelationsFrom time to time, the JSE may receive inquiries from the media about its activities.Only officials who are authorized to do so by the JSE may disclose such information.

Disclosure of InformationInformation relating to the JSE, its employees and clients must be kept confidential.

An employee may not disclose or communicate to any person or make use of anyinformation in relation to the JSEs affairs including trade secrets, property, inventionsetc. that he/she may have acquired while in employ of the JSE.

An employee may not make statements or disclose to any person, including the press,radio or television, any confidential information relating to the JSE, its employees andclients.

Participation on External CommitteesEmployees who serve on external committees/panels during JSE working hours andwho are remunerated for their services are required to reimburse the JSE any moniesreceived for this time.

GiftsEmployees are required to obtain approval before accepting gifts (financial orotherwise).

Conflict of Interest

The general principle that underlies conflict of interest is that employees should avoidany activity, investment or interest that might reflect unfavorably upon the integrity orgood name of the JSE or themselves.

Personal interests should not influence employees when engaging in business dealingson behalf of the JSE. They are expected to place the JSE's interest ahead of anypersonal gain in every business transaction as well as disclose all the facts in anysituation where a conflict of interest may arise.


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Private Business and Secondary EmploymentEmployees may not accept other employment or engage in private business and orwork for gain without written permission from management.

THE FOLLOWING ARE CONSIDERED AS SERIOUS TRANSGRESSIONS AND ARE

PROHIBITED

Sexual Harassment and Indecent AssaultSexual harassment is explained in detail in the JSE Sexual Harassment Policy. Thefollowing is an abridged version of the policy.

y In order to provide a productive and pleasant working environment, it is important thatan atmosphere of mutual respect be maintained in the workplace.

y The JSE will Endeavour to protect employees and clients from sexual harassment in theworkplace.

DishonestyIncludes the following:

Bribery and Corruptionthis includes:

y Giving, receiving or attempting to receive any bribe.y Inducing any person to perform a corrupt acty Receiving a gift from a client in return for a favor(s)

Fraud and Falsification of Information/Documents

Fraud and falsification of information may include:

y Falsifying the completion of JSE documents.y False requests for time off or absence from work due to a claim of illness.y Falsifying the processing of credit transactions.y Making false statements regarding an injury.y Falsifying or changing any document with dishonest intent or attempting to do so.y Making untruthful disclosures.y Giving false evidence against another person.

Sabotage

deliberately inflicting harm or damage with the intention of disrupting the JSEoperations.

ConspiracyPermitting, assisting and encouraging another person to commit a transgression.

Insider Information and TradingLaw prohibits the use of insider information when dealing with securities. Insider


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information can take many forms, but mostly includes information which is not availableto the public and which might influence an investor's decision to buy, sell, or holdsecurities in a company.

Dealing in Securities

Employees and their closely connected persons must obtain prior approval to trade inlisted equities or listed/ unlisted derivatives on such equities, together referred to asSecurities. Employees in the Listings Division may only invest through a discretionarymanaged account. For more details, refer to the Dealing in Securities Policy.

NegligenceEmployees are expected to treat the JSEs material and property with proper care andrespect.

Unauthorized Use and Misuse of the JSE's PropertyThe JSE's property may only be used by authorized employees or non-JSE staff who

must be authorized to do so.

Disreputable Conduct of Employeesan employee may not bring the JSE into disrepute in any way whatsoever.


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With the introduction of electronic settlement through Strate in 1999, the settlementrisks that the JSE is required to identify and mitigate, diminished dramatically.

Risks influencing the environment in which the JSE operates are described below.

As part of its risk management procedures, the JSE has extensive guarantee fundsand insurance cover across all areas of its business, including an In and Outfidelity insurance policy with cover of R250 million covering fidelity related claims byauthorized users and the JSE.

The policy is subject to the JSE being liable to absorb the first R5 million of anysuccessful claim lodged in terms of the policy. This R5 million exposure is in turnself-insured by the JSE through a structure managed by Hollard InsuranceCompany.

Principal risk

Principal risk is the risk of a party losing the full value of a transaction. This wouldresult from the final transfer of funds and the transfer of ownership of securities nottaking place simultaneously.

The implementation of Strate eliminated this risk through simultaneous, final andirrevocable delivery versus payment, thereby substantially reducing the overall riskof participating in the equities market.

Credit risk

The JSE provides a market for the dealing in securities, which is informationtechnology intensive. Dealing is performed electronically through JSE SETS

(equities), the ATS (derivatives) and the interest rate products electronic tradingsystems. In addition, trades in equity securities conducted through JSE SETS aresettled through Strate. In parallel with the provision of this service, the JSE alsoobliges all equities members to maintain their general ledger and client accountingthrough the Broker Deal Accounting (BDA) system.

Technology and systems riskThe technology and systems risk is the inability of the JSEs, and associatedsystems and applications to manage and control the business processes andinformation. The JSE bears this risk, but is exempt from legal liability should eitheror all of the systems referred to above not function efficiently or at all, resulting in

the JSE being unable to provide an efficient operational market.

The Chief Operating Officer and her team together with our various serviceproviders manage the risk associated with BDA, JSE SETS, the ATS and theinterest rate market trading system. This includes having a comprehensiveredundancy and disaster recovery infrastructure and enhanced focus on businesscontinuity management. In addition a comprehensive audit is conducted byindependent consultants to monitor and make recommendations in respect of the


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integrity of these systems. Any risks resulting from this process are being managed.

Settlement and liquidity riskSettlement risk relates to when a party to an outstanding transaction fails to performon the prescribed settlement date and a transaction fails as a result of this.

Liquidity risk is closely associated with settlement risk and is the risk that a party willnot have sufficient liquidity to meet its settlement obligations in a rolling contractualsettlement regime.

1. Equities

there is no settlement or liquidity risk to the JSE in respect of an off-markettrade. The contracting parties to an off-market trade bear this risk.

Settlement performance is the cornerstone of any securities exchange and,therefore, the JSE, in certain prescribed circumstances (on-market trades

between two members) guarantees settlement and is required to managesettlement, bearing the liquidity and price risk for both the cash andsecurities.

The failure by a party to perform its settlement obligations might result in thecounterparty having an open position. To address this situation it isnecessary to incur the cost of replacing, at current market prices, thesecurities that were subject to the original transaction. This risk isexacerbated by liquidity risk and price risk, which is the possibility that theprice of replacing the required securities has materially and negativelychanged. The JSE equities environment comprises a hierarchical risk

structure with the obligations of the client being guaranteed by the clientsmember. The members obligations in this regard are in turn guaranteed bythe JSE. The JSE has recourse in respect of any negative price movementagainst the member who introduced the trade. Accordingly, the JSEssettlement risk in this regard is directly proportional to the extent that both theclient and the member are not able to perform their obligations.

The JSE has, through its rules, taken steps to address and limit settlement,price and liquidity risk. The Settlement Authority is appointed in terms of theJSE rules and is currently the Director: Clearing and Settlement who isdedicated to facilitating and managing settlement. The Settlement Authority

has a wide range of intellectual and information technology resources at hisdisposal as well as farreaching powers to manage the relevant risks andfacilitate the settlement of listed equity securities. These powers include theability to impose collateral requirements on members and to act as lender oflast resort (shares and cash) to a party who is potentially not able to complywith its obligations. The Settlement Authority has, through various avenues,secured access to settlement facilities. To date, only shares have beenborrowed in this regard and the JSE is in the unique position of having had


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zero failed equities trades since the implementation of Strate six years ago.

2. Derivatives and interest rate productsIn respect of derivatives and interest rate products traded through the EquityDerivatives Market Agricultural Products Market and Yield-X respectively,

provided that a transaction is traded through the ATS system, theconsiderations set out below will apply. Warrants are traded in the samemanner as equities, through JSE SETS and the situation set out in 1 aboveapplies to them.

With regard to the derivatives and interest rate business, a hierarchical riskmanagement structure exists. In terms of this structure, members guaranteeclient obligations and clearing members guarantee member obligations. Theclearing members are financial institutions of substance. This structure, inconjunction with the margining system, is effective in managing thesettlement, liquidity and price risks. The Director: Trading is responsible for

risk management of equity derivatives and interest rate products, while theSenior General Manager: Agricultural Products is responsible for the riskmanagement of agricultural derivatives.

Systemic riskSystemic risk is the risk where a disruption to the JSE, Strate, a Central SecuritiesDepository Participant, a custody services provider, clearing member or thesettlement system as a whole, causes a knock-on effect throughout the financialmarkets, toppling one financial institution after another, resulting in a loss ofconfidence in the system. This could result from a lack of solvency on the part of astakeholder resulting in an inability to settle a multitude of transactions.

Alternatively, an operational issue may contribute towards large-scale non-fulfillmentof transactions.

The JSE is exposed to systemic risk, which is managed by the various stakeholderswho participate in the financial markets. The JSE manages the risk insofar as it canthrough the Settlement Authority and the Surveillance, Operations & Services,Strategy & Legal Counsel divisions by means of a uniform and flexible policy of riskmanagement and controls. The Risk Management Committee also participates inmanaging this risk and the JSE is an active participant in a number of industryforums aimed at preventing systemic risk.

Fidelity riskThis is the risk of employees or agents of the JSE committing fraud or anunauthorized activity. The JSE has a large amount of funds under its management,including monies deposited in JSE Trustees (Pty) Limited, SAFEX ClearingCompany (Pty) Limited, the JSE Guarantee Fund Trust and the JSE DerivativesFidelity Fund Trust. The Chief Financial Officer is responsible for managing this risk,which is mitigated through the enforcement of stringent delegation of powers,


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segregation of duties, application of rules setting out checks and balances, low riskinvestment policies as well as fidelity and similar insurance.

Legal riskThis is the risk that a transaction or contract cannot be consummated due to a legal

impediment. The JSE is subject to this risk. The Deputy CEO is responsible foraddressing this risk and heads up the legal division, which consists of four legalprofessionals who, in conjunction with external legal counsel, including SeniorCounsel, attend to managing this risk.

Currency risk

This is the risk of defaulting on foreign currency payment obligations as a result ofthe devaluation of the Rand.

The JSE is exposed to this risk in terms of:

an agreement with the London Stock Exchange (LSE) in terms of which the LSEprovides the JSE with TradElect and InfoWiz;an agreement with GL Trade in terms of which the JSE is provided with front endtechnology (known as TALX); and

An agreement with Microsoft for the provision of operating and data base softwarelicences as part of the JSEs transition to next generation technology.

This risk is managed by the Chief Financial Officer, in consultation with a ForeignExchange Committee comprised of JSE staff and industry specialists, through theuse of derivative financial instruments to limit exposure.

Reputational RiskReputation risk is the risk of damage to the JSEs reputation and brand. Given thenature of financial markets and the importance of the integrity of the markets, this isa very serious risk and is a risk which is a natural consequence of all other risks setout above.

The CEO is generally responsible for managing this risk. Under his guidance, allaspects of the JSE business are focused on ensuring a safe, transparent andefficient market. The initiatives set out in the sustainability report provide a numberof examples of activities conducted by the JSE in this regard.

Strate is a crucial element of the market. The risk associated with electronicsettlement is not directly within the control of the JSE. This risk, if not managed, willresult in the tarnishing of the JSEs reputation and affect the ongoing viability of theequities market. The JSE is represented on the Strate board of directors andparticipates in its Board sub-committees. In this way, the reputational risk to the JSEresulting from a Strate-related is monitored and assistance provided in themanagement thereof. Ongoing international surveys and evaluations havehighlighted the enormous improvements to operational and settlement risk


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OVERVIEWIn recognition of the growing importance of responsible and sustainable businessbehaviour, the JSE has for many years embarked upon programmes which uphold andsupport sustainable development.

Companies are being urged to heed the call for responsible and sustainable businesspractices underpinned by good corporate governance and to align business strategiesand policy to this end. Increasingly, there is a move to focus more on improvedtransparency through reporting of performance as opposed to glossy recital of selectachievements. Globally there is also more focus on responsible investing. Early in 2006,the UN Secretary General launched the UN's Principles for Responsible Investment("PRI") requiring signatories to consider non-financial risk indicators in investmentdecision and analysis. The JSE believes it needs to play a part in these initiatives.

PHILOSOPHYThe JSE uses its Socially Responsible Investment ("SRI") Index criteria as a means to

focus its sustainability practices.

Stakeholder engagement remains a priority as does the maintenance of all principles ofgood corporate governance and long term economic sustainability. Our intention withour sustainability reporting is to increasingly provide quantifiable, comparableinformation that can be used to monitor performance of our sustainability practices.

ENVIRONMENTAL SUSTAINABILITYThe JSE is classified as a low environmental impact company. Although thisclassification brings with it significantly lower responsibility in relation to environmentalimpact, the JSE is committed to continuing to work toward reducing the direct negative

environmental impacts the JSE has as well as to raising awareness around theresponsibility of low impact companies to minimize the their indirect impact on theenvironment.

Achievements from the year under review, which contributed to the JSE's improvedenvironmental performance, are as follows:

y Continued awareness-raising around the critical environmental issues through the SRIIndex criteria;

y Implementation of energy efficient light bulbs throughout the JSE building;y Placing paper recycling bins in all areas of operation;y Implementing the use of recycled printing paper.

Some of the key focus areas going forward include:

y The development of a formal environmental management system, including internalstructures to monitor performance and implement remedial action;


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y Formulating a policy to standardize recycling across the company, to address wasteand improved energy efficiency, and investigate further potential remedial actions fornegative impacts on natural resources such as water;

y Expanding its environmental sustainability awareness raising initiatives beyond the SRIIndex, especially internally.

The JSE is not presently involved in any projects or financing activities that have indirectnegative environmental impacts.

There have been no fines, accidents or other significant environmental incidents duringthe year under review.

SOCIAL SUSTAINABILITYThis area of sustainability is an area of strength for the JSE particularly in relation toemployee relations. In line with its drive to retain its employees and optimize employeecapacity, developmental policies such as the employment equity plan, individual skills

plan and a long term incentive and retention scheme for key senior employees havebeen put in place.

The JSE has also made achievements in its implementation of empowerment strategieswith over 60% women and over 54% black employees in the staff complement. Inrelation to broad based BEE, the JSE has a 9% direct black shareholding and a blackshareholder retention strategy through the introduction of the black shareholderretention scheme implemented as part of the JSE's listing in June 2006. The JSEEmpowerment Fund ("JEF") which was also launched as part of the JSE's listing andqualifies as a BEE shareholder, provides promising black students the finance andsupport that will allow them the appropriate qualifications and opportunity to enter the

financial services sector on completion of their University training.

The JSE is an active investor into the community, through its involvement in varioussocial upliftment initiatives such as:

y Nurturing Orphans of Aids for Humanity, to which the JSE contributes financially; andy The JSE/ Liberty Investment Schools and University challenge, in which the JSE invests

staff time and expenses each year.

As regards stakeholder engagement, the JSE actively engages all relevant stakeholdersthrough regular communication sessions, meetings and other engagement processes,such as:

y Government and authorities -The JSE participates in various bodies such as theFinancial Markets Advisory Board, the Standing Advisory Committee on Company Law,the Money Laundering Advisory Council and the GAAP monitoring panel.

y Regulators - A Financial Services Board representative is invited to attend all EXCOand board meetings.


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y Customers - customers and brokers are engaged through regular communicationsessions, as well as ongoing communication with data vendors and other clients.

y Local community - JSE communications officers make presentations to schools,universities and other community groups on a regular basis.

y Staff - feedback meetings, newsletters, intranet and email.y

Investors - following its listing, the JSE has launched an investor relations web site andis developing an investor relations strategy.

In addition, the JSE also maintains contact with its stakeholders through Gazettes tomembers, press releases, SENS announcements and the JSE magazine.

Going forward, linkages and strategic partnerships will be explored with relevant interestgroups so as to establish cohesion and value in addressing corporate socialresponsibility.

The JSE will set clear objectives and targets related to employee occupational health

and safety. Although initiatives are in place through policies and the availability ofemergency protocols, the JSE will look to implement a sound monitoring andmeasurement system to assess possible cases and incidents.

There have been no fines, accidents or other significant social incidents in the periodunder review.

ECONOMIC SUSTAINABILITYStrategic management procedures are also implemented to determine medium and longterm opportunities. Business indicators are implemented through key performanceindicators. Business cases on major innovations particularly related to IT are presented

to the executive management or the Board for approval. The JSE is further committedto product development and research.


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PRODUCTS

Bond Futures

Bond Options (Carries)

B-Ordinary Shares

Can-Do Futures and Options

Carbon Credit Notes (CCNs)

CBOT Soybean complex Futures & Options (includes beans, meal and oil)

Chicago Corn Futures & Options

Copper Futures

Crude Oil Futures & Options

Currency Futures

Currency Options

Debentures

Depository Receipts

Dividend Futures

Equity Index Futures

Equity Options

Exchange Traded Funds (ETFs)

Exchange Traded Notes (ETNs)

FTSE/JSE Africa Index Series

Gold Futures & Options

SAVInternational Derivatives (IDX)

Krugerrand

Linked Units

N-Ordinary Shares

Options on Commodity Futures


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Ordinary Shares

Participatory Interests

Platinum Futures & Options

Preference Shares

Real Estate Investment Trusts (REIT's)

SAVI DollarI Squared

SAVI Top40

SAVI White Maize

Share Installments

Silver Futures

Single Stock Futures

Spot and Forward Bonds

TALX

Warrants

Grain Futures & Options

MARKETS

Currency Derivatives Market

Currency Futures & Options trade on the electronic trading platform - Nutron, offering an

efficient, electronic, automatic and transparent platform for the trading of currency derivativeproducts.

The following currencies are listed on the exchange: Dollar/Rand, Euro/Rand, Pound/Rand,

Australian Dollar/Rand


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Equity Derivatives Market

The Equity Derivatives market provides a platform for trading Futures and/or Options. Futures

and Options are derivative instruments which derive their value from an underlying instrument.

On-Exchange trading ...

Equity Market

The Equity Market provides investors with the opportunity to trade a multitude of listed

securities including Equities, Exchange Traded Funds (ETFs) and Warrants

This market also provides companies with the opportunity to raise capital in a highly regulated

environment

Interest Rate Market

Introduction to Interest Rate Market

The Johannesburg Stock Exchanges Interest Rate Market provides investors with the

opportunity to trade products in both the cash and the derivative markets.

Clients can trade on-exchange (Central Order Book) or away from the market

SAFEX Commodity Derivatives Market

The Commodity Derivatives Market provides a platform for price discovery and efficient pricerisk management for the grains market in South and Southern Africa. More recently, the

Division also offers derivatives on precious metals and crude oil.


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TYPES OF SHARES & INVESTMENT PRODUCTS

There are various types of shares and investment products to suit different individual needs, for

example conservative or safe shares versus riskier shares.

A list of basic share investment products is included below:

Ordinary shares

B-Ordinary shares

N-Ordinary shares

Preference shares

Exchange Traded Funds

Access to the stock market

To buy or sell shares on the Johannesburg Stock Exchange (JSE) you need to open a brokerage

account with a stockbroker.

Buying and selling ETFs does not require a brokerage account. You can contact the ETF provider

directly to invest in these investment products.However, owning a brokerage account allows

you to invest in all kinds of investment products, not only ETFs. (exchange traded funds)

Innovations

THE DIGITAL REPORTING EVOLUTION

The JSE has introduced an exciting financial online reporting portal which will allow companiesto file their financial reports using a global business electronic reporting standard that makes it

faster, simpler and more accurate for investors and analysts to access their company

information.

Encouraged by leading stock exchanges, supported by many developed countries and

welcomed by analysts and investors alike, digital reporting is likely to become part of every

financial directors future. Just as spreadsheets revolutionized accounting, digital reporting is

certain to transform financial reporting. Digital reporting is faster, better, cheaper; in short it is

financial reporting for the digital age


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JSE LIMITED

BOARD CHARTER


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JSE LIMITED

BOARD CHARTER

IndexPage Number

1. Preamble.................................................................................................................1

2. Aim and Objectives................................................................................................1

3. The Role of the Board............................................................................................2

4. Composition of the Board.....................................................................................4

5. Board Leadership...................................................................................................5

6. Induction of New Board Members........................................................................8

7. Undertakings by Board Members.........................................................................9

8. Term of Board Appointment................................................................................10

9. Remuneration of Board Members.......................................................................11

10. Board Governance...............................................................................................12

11. Board Committees...............................................................................................15

12. Matters Reserved for the Board..........................................................................16

13. Board Evaluation and Performance ...................................................................17

14. Internal Audit........................................................................................................18

15. Company Secretary..............................................................................................18

16. Process for Review of Board Charter.................................................................19


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1. PREAMBLE

1.1. JSE Limited (the JSE or the Exchange) is a public company with a sharecapital, duly incorporated on 1 July 2005 for the purpose inter alia ofcarrying on the business of a securities exchange.

1.2. The Board of Directors of the JSE regards corporate governance asfundamentally important to the achievement of the JSE's mission, itsfinancial objectives and the fulfillment of its corporate responsibilities, andis accordingly unreservedly committed to applying the core governanceprinciples of fairness, accountability, responsibility and transparency in allof the JSEs business dealings with its stakeholders.

1.3. The Board is the focal point of the JSEs corporate governance system andremains ultimately accountable and responsible for the performance andaffairs of the Exchange. It should exercise leadership, enterprise, integrity

and judgment in directing the Exchange so as to achieve the objects setout in the JSEs memorandum and articles of association.

1.4. All members of the JSEs Board of Directors are likewise responsible to ensurethat the Exchange achieves and maintains the highest level of businessconduct.

2. AIM AND OBJECTIVES

2.1. The aim of this Board Charter is to regulate the parameters within which theBoard will operate and to ensure the application of the principles of goodcorporate governance in all dealings by, in respect and on behalf of theJSE.

2.2. This Board Charter sets out the specific responsibilities to be discharged by theBoard members1 collectively, as well as the roles and responsibilitiesincumbent upon directors as individuals. It seeks further to ensure that allBoard members acting on behalf of the JSE are aware of the variouslegislation and regulations affecting their conduct.

2.3. Whilst this Board Charter of necessity includes references to minimumacceptable standards of conduct, in pursuit of the ideals underlying thisCharter, the Board recognizes that the JSE, by virtue of the crucial role thatit plays in respect of the economy of South Africa as well as its regulatoryrole, sets the benchmark against which companies listed on the Exchangewill measure their corporate governance practices.


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2.4. The Board recognizes that with regard to corporate governance, it is criticalthat substance prevails over form, and in applying the principles containedin this Board Charter the Board will be guided by the principles andrecommendations contained in the 2002 King Report on CorporateGovernance for South Africa (King II) and established standards of best

governance practice, locally, internationally and as espoused in the JSEListings Requirements.

2.5. This Board Charter shall constitute an integral part of each Board membersletter of appointment.

3. THE ROLE OF THE BOARD

3.1. Article 28 of the articles of the JSE vests the management and control of theJSE in the Board which has the powers conferred upon it by the relevantlegislation, the rules of the JSE made in terms of such legislation, and the

JSEs memorandum and articles of association.

3.2. The Board's primary responsibilities, based on an agreed assessment of levelsof materiality, include giving strategic direction to the JSE, identifying keyrisk areas and key performance indicators of the Exchanges business,monitoring investment decisions, considering significant financial mattersand risk and, where applicable, industry standards.

3.3. The Board should specifically:

3.3.1. retain full and effective control over the JSE, and monitormanagements implementation of the strategic plans andfinancial objectives as defined by the Board;

3.3.2. Define levels of materiality, reserving specific powers to itself anddelegating other matters, with the necessary written authority, tomanagement;

3.3.3. Continually monitor the exercise of delegated power bymanagement;

3.3.4. Ensure that a comprehensive system of policies and procedures is inplace and that appropriate governance structures exist to ensurethe smooth, efficient and prudent stewardship of the Exchange;


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4.6.2. The capacity of each appointee to satisfy the competencyrequirements necessary for being a director; and

4.6.3. Taking cognizance of the race and gender of the candidate to ensurethe achievement of demographic equity

4.7. Key qualifications and competencies for membership of the Board are:

4.7.1. The ability to make sensible and informed business decisions andrecommendations and the ability to contribute an independentview to matters under consideration and to add value to Boarddeliberations;

4.7.2. High ethical standards and sound practical sense and the ability todemonstrate a wide, and unfettered, perspective on issues; and

4.7.3. Full commitment to furthering the interests of the JSE in achieving itsgoals and, where appropriate, bring the benefit of internationalexperience to the Board.

4.8. Every director recognizes that his or her primary fiduciary duty is to the JSE asan entity and not to the constituency on behalf of which that director mayhave been appointed. Irrespective of a Board members special expertiseor knowledge, all members of the Board recognize that they are collectivelyresponsible for the performance of the JSE.

5. BOARD LEADERSHIP

5.1. The JSEs philosophy of Board leadership is premised on the principle that therunning of the Board of directors and the executive responsibility for therunning of the Exchanges business are two separate and distinct tasks.

5.2. There should accordingly be a clear division of responsibilities between thesetwo roles to ensure a balance of power and authority, such that no oneindividual has unfettered powers of decision-making.

5.3. The roles of Chairman and CEO shall be separate, with responsibilities dividedbetween them.


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5.4. The Chairman

5.4.1. The references in this Board Charter to the Chairman shall bedeemed to include a reference to the Deputy Chairman where

one is appointed.

5.4.2. The Chairman shall have no executive functions.

5.4.3. The Chairman, and if so agreed by the Board, a Deputy Chairman,shall be appointed and removed from office at any time by anordinary majority of the Board.

5.4.4. The Chairman shall hold office for a term of three (3) years from thedate of appointment.

5.4.5. A Chairman may be appointed for a maximum of two (2) consecutiveterms.

5.4.6. Subject to the provisions of 5.4.4 and 5.4.5, a past Chairman may beelected to serve additional terms of office.

5.4.7. The Chairman shall preside over meetings of the Board and shall beresponsible for ensuring the integrity and effectiveness of theBoard governance process.

5.4.8. The Chairman must ensure that the content and order of the Boardagenda is appropriate, that Board members are properly briefedon issues arising at Board meetings and that all relevant andavailable information on an issue is placed before the Board inorder that members may make informed decisions.

5.4.9. The Chairman shall be responsible for maintaining regular dialoguewith the CEO over all operational matters and will consult withthe remainder of the Board promptly over any matter that giveshim or her cause for concern.

5.4.10. The Chairman will act as facilitator at meetings of the Board toensure that no director, whether executive or non-executive,dominates the discussion, that relevant discussion takes place,that the opinions of all directors relevant to the subject underdiscussion are solicited and freely expressed, and that Boarddiscussions lead to appropriate decisions.


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5.4.11. The Chairman will seek a consensus in the Board but may, whereconsidered necessary, call for a vote in which event the decisionof an ordinary majority of the Board shall prevail.

5.4.12. The Chairman shall act as an informal link between the Board andthe CEO, shall be kept informed by the CEO on all important

matters between Board meetings, and shall be available to theCEO to provide counsel and advice where appropriate.

5.5. The Chief Executive Officer

5.5.1. As determined by article 25 of the JSEs articles, the non-executiveBoard members shall appoint the CEO and set the terms andconditions of his or her employment contract.

5.5.2. The task of the CEO is to run the business and to implement thepolicies and strategies adopted by the Board.

5.5.3. All Board authority conferred on management is delegated throughthe CEO, so that the authority and accountability of managementis considered to be the authority and accountability of the CEOinsofar as the Board is concerned.

5.5.4. The Chairman, in consultation with the Board, shall set certainspecific targets directed towards the JSE achieving its goals andbusiness objectives and an appropriate delegation of authority tothe CEO to enable the targets to be achieved. The CEO shall actwithin the specific authorities delegated to him or her by theBoard.

5.5.5. The Board on an annual basis shall measure the performance of theCEO in achieving the specified targets.

5.5.6. Without in any way limiting the obligations of the CEO as determinedin his or her contract, the CEO shall, in particular, be responsible:

5.5.6.1. To ensure that the assets of the JSE are adequatelymaintained and protected, and not unnecessarilyplaced at risk;

5.5.6.2. To ensure that comprehensive and appropriate internalcontrol mechanisms are recommended to andadopted by the Board in order to mitigate againstkey risks;

5.5.6.3. not to cause or permit any practice, activity or decisionby or within the JSE that is contrary to commonly


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accepted good business practice, good corporategovernance or professional ethics; and

5.5.6.4. To communicate to the Board, at least annually, theJSEs senior management succession planning and

management development initiatives, includingdetails of the Exchanges compliance withemployment equity and human capital developmentimperatives.

5.5.7. The Board shall monitor and evaluate the performance of the CEOagainst these agreed objectives at least once annually or morefrequently should the board in its discretion so determine.

5.5.8. Only decisions of the Board acting as a body shall be binding on theCEO. Decisions or instructions of individual members of the

Board, officers or committees are not binding except in thoseinstances where specific authority is delegated by the Board.

6. INDUCTION OF NEW BOARD MEMBERS

6.1. On appointment, new Board members will undergo an induction programmeaimed at facilitating their understanding of the JSE and the businessenvironment and markets in which it operates. The induction programmewill entail at least the following:

6.1.1. background on the JSE (including its memorandum and articles ofassociation, ownership rules, regulations and applicable laws,Board and governance structures, membership, and an overviewof its key policies and processes);

6.1.2. Guidance on the business of the Exchange (business processes,corporate strategies, organization, management and people andcomparison with international benchmarks);

6.1.3. Instruction in the key financial statements (i.e. annual accounts,directors' reports, trends of the key financial ratios and financialperformance of the business);


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6.1.4. a clear identification of reciprocal expectations on appointment (byway of discussions with the Chairman with regards to thedirectors role, potential contributions and particular knowledge,the identification of any gaps in knowledge of board or

governance procedures where training may be required, and aclear understanding of the directors own expectations from theChairman and the Board as a whole);

6.1.5. Familiarization with the JSEs operations, senior management andits business environment; and

6.1.6. Formal induction in terms of their fiduciary duties andresponsibilities.

6.2. As part of the induction programme, new non-executive Board members will

receive a letter of appointment, of which this Board Charter will form anintegral part, together with induction material containing essential Boardand Exchange information.

6.3. There shall be no distinction drawn between non-executive directors andalternate non-executive directors and the rights and obligations ascribed todirectors in terms of this Board Charter shall apply to alternate boardmembers duly appointed in terms of articles of the JSE.

7. UNDERTAKINGS BY BOARD MEMBERS7.1. Every Board member shall:

7.1.1. At all times conduct him or herself in a professional manner, havingdue regard to his or her fiduciary duties and responsibilities to theJSE;

7.1.2. uphold the core values of integrity and enterprise in all dealings onbehalf of the JSE;

7.1.3. Ensure that he or she has sufficient time available to devote to theirduties as Board members. Non-executive directors shall notifythe Company Secretary as soon as practicable after theacceptance of any additional directorships or externalappointments, following their appointment to the Board of theJSE;

7.1.4. be diligent in discharging his or her duties to the Exchange and shallseek to acquire a broad knowledge of the business of the JSE soas to be able to provide meaningful direction to it;


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7.1.5. regularly attend meetings of the Board and any Board committees onwhich he or she serves and will tender his or her resignation inthe event that the Board Member is unable to attend threeconsecutive Board or Board Committee meetings; and

7.1.6. Endeavour to keep abreast of changes and trends in the businessenvironment and markets, including changes and trends in theeconomic, political, social and legal climate generally, which mayimpact the business of the JSE.

7.2. Every Board member should, in addition, be aware of and conversant with thestatutory and regulatory requirements affecting the direction of theExchange, including, inter alia:7.2.1. Memorandum and articles of the JSE;

7.2.2. Securities Services Act 2004, as amended;

7.2.3. Such other national legislation and regulations governing theoperation and conduct of the JSE.

7.3. Executive Board members shall not accept appointments to the Board of aCompany listed on the JSE (listed Company) or a Company that is notlisted and holds ten percent or more of the shares in a listed Company

8. TERM OF BOARD APPOINTMENT

8.1. The Board recognizes that Board continuity, subject to performance andeligibility of directors for re-election, is imperative to the proper governanceof the JSE.

8.2. Board members have no fixed term of appointment, however in terms of article24 of the JSEs articles, one-third in number are required to retire byrotation annually. All non-executive directors and executive directors aretherefore subject to retirement by rotation at least once every three years inaccordance with the article 25 of the articles of the JSE.


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8.3. In determining the eligibility for re-election of non-executive directors who retireby rotation, the Board shall seek to maintain the optimum balance betweenthe need for board continuity and experience, the appropriate mix amongstdirectors of skills and experience, board diversity and the desirability for the

board to be infused with new personalities and fresh ideas.

8.4. New non-executive Board members appointed to fill a vacancy will only holdoffice until the next annual general meeting, at which they will retire andbecome available for election.

8.5. The termination of an employment contract of an executive director will resultipso facto in the termination of his or her membership of the Board, unlessthe Board determines otherwise.

9. REMUNERATION OF BOARD MEMBERS

9.1. The Board will determine the level of remuneration paid to non-executivedirectors within any limitations imposed by share holders and thememorandum and articles of the JSE.

9.2. In deciding on appropriate levels of remuneration, the Board shall be guided bythe principle that whilst levels of remuneration should be sufficient to attractand retain the caliber of Board members needed to run the JSEsuccessfully, it should avoid paying more than is necessary for thispurpose.

9.3. A formal and transparent procedure shall be established for developing policyon remuneration and for fixing the remuneration packages of individualBoard members and no Board member shall be involved in deciding his orher own remuneration.

9.4. Non-executive Board members shall receive no rights, options nor othersignificant benefits from the JSE, other than their directors' fees, which willbe paid as follows:

9.4.1. A basic fee as ordinary remuneration, which includes a retainer anda fee for attendance at meetings;

9.4.2. An additional fee payable to a Board member who acts as Chairmanof a Board committee, or who is a member of a Board committee;

9.4.3. Additional fees payable to any Board member who, in the discretionof the Board, renders any special service as a Board member.

9.5. The Chairman of the Board will be paid a level of fee appropriate to his or heroffice.


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9.6. The Board will review board members remuneration annually after takingindependent advice.

9.7. Executive Board members will receive no additional fees, but will be paid asemployees of the JSE in accordance with their contracts of employment.

9.8. The Board is committed to achieving transparency with regard to issues ofremuneration and details of Board members remuneration shall bedisclosed in the JSEs annual report and accounts.

10. BOARD GOVERNANCE

10.1. Board Meetings

10.1.1. Board members will use their best endeavors to attend all Boardmeetings and to read all necessary documentation and prepare

themselves thoroughly in advance of Board meetings. Boardmembers are expected to participate fully, frankly andconstructively in Board discussions and other activities and tobring the benefit of their particular knowledge, skills and abilitiesto Board discussions.

10.1.2. Board members who are unable to attend shall advise theChairman or the Company Secretary in advance of a meeting.

10.1.3. The Board should allow every director to play a full and constructiverole in its affairs, within the limitations imposed by thememorandum and articles of the JSE, all applicable legislation,and Board and/or share holders resolutions specificallyregulating the powers and responsibilities of directors.

10.1.4. As and when required, the Board shall

10.1.4.1. Review and evaluate the present and future strengths,weaknesses and opportunities in respect of theExchange. Comparisons with competitors and bestpractice are important elements of this process;

10.1.4.2. Review and approve the JSEs financial objectives,plans and actions and significant allocation andexpenditure;

10.1.4.3. review the JSEs goals and the strategies for achievingthese;


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10.3. Agenda, Meeting Papers and Access to Information

10.3.1. The Chairman must, together with the Company Secretary,establish appropriate standards for preparation of Board papers

and reports.

10.3.2. The Chairman must ensure that an agenda is prepared prior to themeeting and that all issues requiring attention are suitably dealtwith. The Chairman shall have effective authority over the Boardagenda, however, any Board member may request, through theCompany Secretary, that any matter requiring board deliberationbe added to the agenda.

10.3.3. The Company Secretary must circulate the agenda and othermeeting papers to the Board members at least five (5) working

days before the date of the meeting.

10.3.4. Board members shall be entitled to have access, at reasonabletimes, to members of senior management and to all relevantinformation to assist them in the discharge of their duties andresponsibilities and to enable them to take informed decisions.Board members shall, however, strictly observe the provisions ofall applicable legislation related to the use and confidentiality ofinformation obtained by virtue of their position as directors of theJSE.

10.4. Minutes and Retention of Meeting Papers

10.4.1. Minutes of the Board meeting will, as far as is reasonably possible,be circulated to all members of the Board by the Companysecretary within two (2) weeks of the date on which the Boardmeeting was held, after review and approval by the Chairman.

10.4.2. The Board agrees that the maintenance of the confidentiality ofBoard proceedings is of paramount importance. In order tofacilitate the maintenance of confidentiality, all meeting papersand submissions of a sensitive nature shall be left in theboardroom on conclusion of the meeting for disposal by theCompany Secretary.

10.4.3. The Company Secretary shall keep records of all Boardsubmissions and papers, and of all material presented to theBoard together with the minutes of meetings. These records willbe accessible to all directors upon request


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10.4.4. The Board agrees that the maintenance of the confidentiality ofBoard proceedings is of paramount importance, especially giventhe price sensitive nature of many of the matters underconsideration. To secure this high level of confidentiality, anypapers left in the boardroom at the conclusion of any meeting will

be destroyed by the Company Secretary.

10.5. Independent Professional Advice

The Board shall approve a procedure in terms of which any director maytake independent professional advice, at the expense of the JSE, wherethere is doubt as to whether a proposed course of action is consistent withhis or her fiduciary duties and responsibilities.

10.6. Conflicts of Interest

10.6.1. Board members must inform the Board of any conflicts or potentialconflicts of interest they may have in relation to particular items

of business, as soon as he or she becomes aware of suchconflict or potential conflict.

10.6.2. Directors should recuse themselves from discussion or decisionson matters in which they have a conflict of interest, unless theBoard otherwise agrees.

11. BOARD COMMITTEES

11.1. The Board may form such committees as may be necessary to facilitateefficient decision-making and to assist the Board in the execution of itsduties, power and authorities. The Board presently has four standingcommittees, namely, the Audit Committee, the Human ResourcesCommittee, the Nominations Committee, and the Risk ManagementCommittee.

11.2. Each committee of the Board shall be constituted with formal Terms ofReference, which shall determine inter alia the membership, purpose,powers and authority of the committee, the scope of its mandate and itsrelationship to the board.

11.3. As general principles:

11.3.1. Board committees will observe the same rules of conduct andprocedures as the Board, unless the Board specificallydetermines otherwise in the committees Terms of Reference;


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11.3.2. Board committees shall be entitled only to act on behalf of theBoard when specifically so authorized;

11.3.3. The authority conferred on a Board committee will not derogate

from any authority delegated to the CEO by the Board;

11.3.4. . There shall be transparency and full disclosure from the Boardcommittees to the Board, except where the Board has otherwisemandated the committee.

11.4. The delegation of the Boards authority in certain defined areas to committeesconstituted in terms of this cause will absolve neither the Board, nor itsdirectors, from their respective accountability to ensure the due dischargeof their duties and responsibilities.

12. MATTERS RESERVED

FOR THE BOARD

12.1. The following matters shall be reserved for decision by the Board, supportedby any recommendation as may be made from time to time by thecommittees of the Board (as appropriate):

12.1.1. The approval of the strategy, business plans and annual budgetsand of any subsequent material changes in strategic direction ormaterial deviations in business plans;

12.1.2. The adoption of any significant change or departure in theaccounting policies and practices of the JSE and its subsidiaries;

12.1.3. the entering into of any agreement which involves budgetedexpenditure in excess of R2 million, or which involvesunbudgeted expenditure in aggregate exceeding five percent ofthe total budgeted expenditure for the year in question, with noone item of such expenditure exceeding R 500 000;

12.1.4. The approval of annual financial statements and the approval ofinterim reports;

12.1.5. Any decision regarding the incorporation of the JSE;

12.1.6. The convening of general meetings of share holders of the JSE;

12.1.7. Appointments to and removals from the Board of executive or non-executive directors;


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12.1.8. The appointment and approval of Terms of reference of andchanges in the composition of the committees of the Board asare established from time to time;

12.1.9. The appointment, removal or replacement of the Company

Secretary;

12.1.10. The appointment, removal or replacement of the external auditorof the JSE;

12.1.11. Any increase of Board members fees;

12.1.12. The frequency of meetings of the Board;

12.1.13. The approval of recommended policies in relation to employmentequity, transformation and diversity issues, environment, health

and safety;

12.1.14. Based on the recommendations of the Risk ManagementCommittee, the adoption of appropriate risk management andinternal control strategies;

12.1.15. any other power not specifically delegated to the CEO and/ormanagement in terms of the Delegation of Powers Resolutiondated 1 December 2000 (as amended) and annexed heretomarked Annexure A; and

12.1.16. The monitoring of the exercise of delegated powers exercised bythe CEO and/or management in terms of Annexure A.

13. BOARD EVALUATION AND PERFORMANCE13.1. In line with the recommendations of King II, the Board shall Endeavour to

evaluate its performance from time to time and to benchmark itsperformance against international best practice.

13.2. The Board shall appoint a lead director who shall be an independent non-executive director.

13.3. The lead director shall appraise the performance of the Chairman on anannual or such other basis as the Board may determine. The Board shalllikewise consider the implementation of an annual process for theevaluation of each of the Board members in due course


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13.4. The Chairman, if necessary with the guidance of the Human ResourcesCommittee, shall appraise the performance of the CEO, at least annually,on the basis agreed in terms of the CEOs employment contract. Theevaluation should be based on objective criteria including performance of

the business, accomplishment of long-term strategic objectives,development of management and other similar issues.

13.5. The Board shall also Endeavour to regularly review the performance of eachof the Board committees to ensure that their composition, mandate andauthority enables them to provide effective assistance to the Board in thekey areas in which they function.

14. INTERNAL AUDIT

14.1. The definition of Internal Audit as applied by the Institute of Internal Auditors is

as follows:Internal audit is an independent, objective assurance and consultingactivity designed to add value and improve an organizations operations. Ithelps an organization accomplish its objectives by bringing a systematic,disciplined approach to evaluate and improve the effectiveness of riskmanagement, control and governance processes.

14.2. The internal audit function is recognized to be an integral part of thegovernance structures of the JSE and functions under policies establishedby executive management and the Board. It is responsible to both theBoard and executive management, providing them with:

14.2.1. Assurance that the management processes are adequate toidentify and monitor significant risks;

14.2.2. Confirmation of the effective operation of the established internalcontrol systems;

14.2.3. Ongoing development and evaluation of improved controls;

14.2.4. Credible processes for feedback on risk management andassurance; and

14.2.5. Objective confirmation that the Board receives the right quality ofassurance and information from management and that thisinformation is reliable.


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14.3. The Board must ensure that the internal audit function has the necessarystanding and that it reports at a level within the JSE that allows it todischarge its responsibilities effectively. Internal Audit should reportadministratively to the CEO and functionally to the chairman of the Audit

Committee. In addition Internal Audit should have ready and regularaccess to the Chairman of the Board.

14.4. The appointment or dismissal of the Internal Auditors should be with theconcurrence of the Audit Committee.

15. COMPANY SECRETARY

15.1. The Company Secretary is critically important to the proper governance of theExchange and it is the responsibility of the Board to ensure that theCompany Secretary remains capable to fulfill the function for which he or

she has been appointed. The appointment and removal of the CompanySecretary is a matter for the Board as a whole.

15.2. The Company Secretary shall work closely with the Chairman and the CEO,to ensure the proper and effective functioning of the Board and the integrityof the Board governance process.

15.3. In addition to the statutory duties of the Company Secretary, he or she mustprovide the Board as a whole and the Board members individually withdetailed guidance as to how their responsibilities should be properlydischarged in the best interests of the JSE.

15.4. Particularly in relation to the Board and it