Prefunding of Trades

The ability to identify and monitor risks on an ongoing basis is crucial for a clearing and settlement organisation. The strategy is to avoid, as much as possible, situations that can create unacceptable levels of risk for the clearing and settlement organisation and its participants. It is against this background that trading on VFEX will be on a pre-funded basis. This means that an investor who would like to place a buy order in the market should ensure that the funds are sitting with his participant before the execution of the trade on the VFEX Automated trading system. During the trading session the participant will have real time access of the trading activity on his client accounts and will either affirm or reject trades on the trading date during the open trading and post close trading session. This measure is put in place reduce settlement failure.


As part of the settlement risk settlement risk mitigation measures each Custodian Bank shall also open and
maintain a Central Securities Depository Collateral Sub-Account with the RBZ for the purpose of depositing collateral security. The VFEX has full powers of attorney to drawn down on the collateral if the Participant fails to meet it settlement
obligation on the settlement date. The collateral security which shall be
calculated based on the risk exposure introduced to the securities settlement
system by the custodian, he details of which are fully detailed in the CSD rules and the Operations Procedures Manual.


The Legal, Risk
and Compliance Committee


The VFEX has set up a
board committee on Legal, Risk and Compliance with the following mandate:

1.   Recommend the adoption of a risk management policy
to the Board of Directors

2.   Monitor the operations relating to risk management

3.   Ensure enforcement of the risk management policy
being adopted, at all levels of the organisation

4.   Monitor the operations relating to the collateral obligations
of the custodian banks

5.   Monitor the compliance issues of all participants

6.   Hear complaints from aggrieved Participants who
claim to be adversely affected by any decision of CDS with respect to CDS

7.   Make recommendations to the Boart on legal matters

8.   Make recommendations to the Board of Directors of
VFEX with respect to Participation applications, suspensions and terminations

9.   Oversee the implementation  of the penalties framework


System of
Internal Controls and Audits


The VFEX has implemented
a system of internal controls pertaining to:

1.   The recording of transactions in securities

2.   The processing of transactions, including clearing
and settlement, in accordance with CSD Rules and Procedures

3.   The integrity and reliability of the data
processing facilities

The suitability and effectiveness of the system of internal controls are
verified by external independent auditors on an annual basis.