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

1
 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 :

2
 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

6
 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 player
in 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 Africa’s
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 Africa’s economic landscape. As South Africa’s 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.

7
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 the
Stock 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 Africa’s 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 JSE’s first exchange traded fund, which
tracks the top 40 companies listed on the JSE’s 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

10
 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 on
one 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 JSE’s 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 of 40 000 000 ordinary shares of R1.00 each, of which 8 340 250
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

Nicky Newton-King
Deputy CEO
Member of the King Task Group into Insider Trading, the Financial
Markets Advisory Board, the Financial Centre for Africa’s Strategy
Committee and the Standing Advisory Committee on Company Law;
Previous Partner of Webber Wentzel Bowens Attorneys. 

Appointed to the Board in 2000

Leanne Parsons
Chief Operating Officer
Director of JSE Related Companies 

Appointed to the Board in 2000

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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Appointed to the Board in 2001

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 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

Nicky Newton-King

Deputy CEO

Member of the King Task Group into Insider Trading, the Financial Markets Advisory Board,
the Financial Centre for Africa’s 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 

Appointed to the Board in 2000

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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 

Appointed to the Board in 2001

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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Company JSE Limited
Name:

Registration 2005/022939/06
Number:

Registered One Exchange Square

office: 2 Gwen Lane
Sandown
2196

Postal address: Private Bag X 991174

Sandton
2146

Transfer STRATE
secretary: 1st Floor
9 Fricker Road
Illovo, Sandton

Reporting KPMG Inc

accountants 85 Empire Road
and auditors: Parktown, 2193

Sponsor and Rand Merchant Bank

Joint Financial (A division of FirstRand Bank Limited)
Advisor: One Merchant Place
Corner Fredman Drive and Rivonia Road
Sandton, 2196

Joint Financial Morgan Stanley South Africa (Pty) Ltd

Advisor: 1st Floor
South West Wing
160 Jan Smuts Avenue
Rosebank, 2196
South Africa

Banker: First National Bank

(A division of FirstRand Bank Limited)
4 First Place
Bank City
Corner Pritchard and Simmonds Street

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 Johannesburg

The JSE Ltd is a key part of South Africa’s economic landscape. As South Africa’s only
full service securities exchange, they 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, they are regarded as a mature,
efficient, secure market with world class regulation, trading, clearing, settlement
assurance and risk management.

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)

Their main lines of business are:

 issuer services
 trading
 clearing and settlement
 technology and related services
 information product sales

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 NEED OF THE STUDY

The stock market is a place where capital formation takes place. It’s 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 it’s imperative to study the working of that exchange because in the word of
Milton 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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 RESEARCH METHODOLOGY

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

It’s 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 practical
effort 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 JSE’s regulator, the Financial
Services 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 CEO’s 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
and changes made where appropriate.
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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 sound
performance. 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 JSE’s 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 Board’s primary responsibilities, based on an agreed assessment of levels of
materiality, 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. It
is 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 also
responsible for implementing Board directives.

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

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Russell Loubser Rod Gravelet-Blondin
CEO Agricultural Products

Nicky Newton-King Mpuseng Moloi
Deputy-CEO, Strategy Human Resources
and Legal Counsel

Freda Evans Des Davidson
CFO, Finance Clearing and Settlement

Leanne Parsons Jannie Immelman
COO, Operations and Information Services
Services

John Burke Maureen Dhlamini
Issuer Services Education

Noah Greenhill
Business Development
and Marketing

26
Geoff Rothschild
Government and Gary Clarke
International Affairs Company Secretariat

Ana Forssman
Information Product
Riaan van Wamelen
Sales
Chief Information
Officer, ITU

Shaun Davies Graham  Smale

Surveillance Director: Interest Rate
Products

Allan Thomson
Trading

27
Below is a summary of our committee structure and membership information.

 Chairperson  Member

  Human Risk
Audit Resources Nominations Management
Committee Committee Committee Committee

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 on
the 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 and
stakeholders. The JSE in turn expects all employees to embrace these values and
reflect them in their day-to-day interaction amongst themselves and clients. In order to
realize this commitment the JSE has adopted a code of conduct (extracts from which
are set out below).

STANDARDS

Corporate and Media Relations 

From 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 Information
Information 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 any
information in relation to the JSE’s affairs including trade secrets, property, inventions
etc. 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 and
clients.

Participation on External Committees

Employees who serve on external committees/panels during JSE working hours and
who are remunerated for their services are required to reimburse the JSE any monies
received for this time.

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 Gifts
Employees are required to obtain approval before accepting gifts (financial or
otherwise).

Conflict of Interest
The general principle that underlies conflict of interest is that employees should avoid
any activity, investment or interest that might reflect unfavorably upon the integrity or
good name of the JSE or themselves.

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

Private Business and Secondary Employment

Employees may not accept other employment or engage in private business and or
work for gain without written permission from management.

THE FOLLOWING ARE CONSIDERED AS SERIOUS TRANSGRESSIONS AND ARE

PROHIBITED

Sexual Harassment and Indecent Assault

Sexual harassment is explained in detail in the JSE Sexual Harassment Policy. The
following is an abridged version of the policy.

 In order to provide a productive and pleasant working environment, it is important

that an atmosphere of mutual respect be maintained in the workplace. 
 The JSE will Endeavour to protect employees and clients from sexual
harassment in the workplace.

Dishonesty 
Includes the following:

Bribery and Corruption

this includes:

 Giving, receiving or attempting to receive any bribe.

 Inducing any person to perform a corrupt act
 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:

 Falsifying the completion of JSE documents.

 False requests for time off or absence from work due to a claim of illness.
 Falsifying the processing of credit transactions.

30
  Making false statements regarding an injury.
 Falsifying or changing any document with dishonest intent or attempting to do so.
 Making untruthful disclosures. 
 Giving false evidence against another person.

Sabotage
deliberately inflicting harm or damage with the intention of disrupting the JSE
operations.

Conspiracy
Permitting, assisting and encouraging another person to commit a transgression.

Insider Information and Trading

Law prohibits the use of insider information when dealing with securities. Insider
information can take many forms, but mostly includes information which is not available
to the public and which might influence an investor's decision to buy, sell, or hold
securities in a company.

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

Negligence 
Employees are expected to treat the JSE’s material and property with proper care and
respect.

Unauthorized Use and Misuse of the JSE's Property

The JSE's property may only be used by authorized employees or non-JSE staff who
must be authorized to do so.

Disreputable Conduct of Employees

an employee may not bring the JSE into disrepute in any way whatsoever.

With the introduction of electronic settlement through Strate in 1999, the settlement
risks 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 funds
and insurance cover across all areas of its business, including an “In and Out”
fidelity insurance policy with cover of R250 million covering fidelity related claims by
authorized users and the JSE.

The policy is subject to the JSE being liable to absorb the first R5 million of any

31
successful claim lodged in terms of the policy. This R5 million exposure is in turn
self-insured by the JSE through a structure managed by Hollard Insurance
Company. 

Principal risk
Principal risk is the risk of a party losing the full value of a transaction. This would
result from the final transfer of funds and the transfer of ownership of securities not
taking place simultaneously.

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

Credit risk
The JSE provides a market for the dealing in securities, which is information
technology intensive. Dealing is performed electronically through JSE SETS
(equities), the ATS (derivatives) and the interest rate products electronic trading
systems. In addition, trades in equity securities conducted through JSE SETS are
settled through Strate. In parallel with the provision of this service, the JSE also
obliges all equities members to maintain their general ledger and client accounting
through the Broker Deal Accounting (“BDA”) system.

Technology and systems risk

The technology and systems risk is the inability of the JSE’s, and associated
systems and applications to manage and control the business processes and
information. The JSE bears this risk, but is exempt from legal liability should either
or 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 service
providers manage the risk associated with BDA, JSE SETS, the ATS and the
interest rate market trading system. This includes having a comprehensive
redundancy and disaster recovery infrastructure and enhanced focus on business
continuity management. In addition a comprehensive audit is conducted by
independent consultants to monitor and make recommendations in respect of the
integrity of these systems. Any risks resulting from this process are being managed.

Settlement and liquidity risk

Settlement risk relates to when a party to an outstanding transaction fails to perform
on 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 will
not have sufficient liquidity to meet its settlement obligations in a rolling contractual
settlement regime.

1. Equities

32
 there is no settlement or liquidity risk to the JSE in respect of an off-market
trade. 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 manage
settlement, bearing the liquidity and price risk for both the cash and
securities.

The failure by a party to perform its settlement obligations might result in the
counterparty having an open position. To address this situation it is
necessary to incur the cost of replacing, at current market prices, the
securities that were subject to the original transaction. This risk is
exacerbated by liquidity risk and price risk, which is the possibility that the
price of replacing the required securities has materially and negatively
changed. The JSE equities environment comprises a hierarchical risk
structure with the obligations of the client being guaranteed by the client’s
member. The member’s obligations in this regard are in turn guaranteed by
the JSE. The JSE has recourse in respect of any negative price movement
against the member who introduced the trade. Accordingly, the JSE’s
settlement risk in this regard is directly proportional to the extent that both the
client 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 the
JSE rules and is currently the Director: Clearing and Settlement who is
dedicated to facilitating and managing settlement. The Settlement Authority
has a wide range of intellectual and information technology resources at his
disposal as well as farreaching powers to manage the relevant risks and
facilitate the settlement of listed equity securities. These powers include the
ability to impose collateral requirements on members and to act as lender of
last resort (shares and cash) to a party who is potentially not able to comply
with its obligations. The Settlement Authority has, through various avenues,
secured access to settlement facilities. To date, only shares have been
borrowed in this regard and the JSE is in the unique position of having had
zero failed equities trades since the implementation of Strate six years ago.

2. Derivatives and interest rate products

In respect of derivatives and interest rate products traded through the Equity
Derivatives Market Agricultural Products Market and Yield-X respectively,
provided that a transaction is traded through the ATS system, the
considerations set out below will apply. Warrants are traded in the same
manner as equities, through JSE SETS and the situation set out in 1 above
applies to them.

33
 With regard to the derivatives and interest rate business, a hierarchical risk
management structure exists. In terms of this structure, members guarantee
client obligations and clearing members guarantee member obligations. The
clearing members are financial institutions of substance. This structure, in
conjunction with the margining system, is effective in managing the
settlement, liquidity and price risks. The Director: Trading is responsible for
risk management of equity derivatives and interest rate products, while the
Senior General Manager: Agricultural Products is responsible for the risk
management of agricultural derivatives.

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

Alternatively, an operational issue may contribute towards large-scale non-fulfillment

of transactions.

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

Fidelity risk
This is the risk of employees or agents of the JSE committing fraud or an
unauthorized activity. The JSE has a large amount of funds under its management,
including monies deposited in JSE Trustees (Pty) Limited, SAFEX Clearing
Company (Pty) Limited, the JSE Guarantee Fund Trust and the JSE Derivatives
Fidelity Fund Trust. The Chief Financial Officer is responsible for managing this risk,
which is mitigated through the enforcement of stringent delegation of powers,
segregation of duties, application of rules setting out checks and balances, low risk
investment policies as well as fidelity and similar insurance.

Legal risk
This 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 for
addressing this risk and heads up the legal division, which consists of four legal
professionals who, in conjunction with external legal counsel, including Senior
Counsel, attend to managing this risk.

34
 Currency risk
This is the risk of defaulting on foreign currency payment obligations as a result of
the 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
LSE provides the JSE with TradElect and InfoWiz; 
an agreement with GL Trade in terms of which the JSE is provided with front
end technology (known as TALX); and 
An agreement with Microsoft for the provision of operating and data base
software licences as part of the JSE’s transition to next generation technology.

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

Reputational Risk
Reputation risk is the risk of damage to the JSE’s reputation and brand. Given the
nature of financial markets and the importance of the integrity of the markets, this is
a very serious risk and is a risk which is a natural consequence of all other risks set
out above.

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

Strate is a crucial element of the market. The risk associated with electronic
settlement is not directly within the control of the JSE. This risk, if not managed, will
result in the tarnishing of the JSE’s reputation and affect the ongoing viability of the
equities market. The JSE is represented on the Strate board of directors and
participates in its Board sub-committees. In this way, the reputational risk to the JSE
resulting from a Strate-related is monitored and assistance provided in the
management thereof. Ongoing international surveys and evaluations have
highlighted the enormous improvements to operational and settlement risk

OVERVIEW
In recognition of the growing importance of responsible and sustainable business
behaviour, the JSE has for many years embarked upon programmes which uphold and
support sustainable development. 

Companies are being urged to heed the call for responsible and sustainable business
practices underpinned by good corporate governance and to align business strategies
and policy to this end. Increasingly, there is a move to focus more on improved

35
 transparency through reporting of performance as opposed to glossy recital of select
achievements. 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 investment
decision and analysis. The JSE believes it needs to play a part in these initiatives. 

PHILOSOPHY
The 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 of

good corporate governance and long term economic sustainability. Our intention with
our sustainability reporting is to increasingly provide quantifiable, comparable
information that can be used to monitor performance of our sustainability practices.

ENVIRONMENTAL SUSTAINABILITY
The JSE is classified as a low environmental impact company. Although this
classification brings with it significantly lower responsibility in relation to environmental
impact, 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 the
responsibility of low impact companies to minimize the their indirect impact on the
environment.

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

 Continued awareness-raising around the critical environmental issues through

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

Some of the key focus areas going forward include:

 The development of a formal environmental management system, including

internal structures to monitor performance and implement remedial action;
 Formulating a policy to standardize recycling across the company, to address
waste and improved energy efficiency, and investigate further potential remedial actions
for negative impacts on natural resources such as water;
 Expanding its environmental sustainability awareness raising initiatives beyond
the SRI Index, especially internally.

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

36
 There have been no fines, accidents or other significant environmental incidents during
the year under review.

SOCIAL SUSTAINABILITY 
This area of sustainability is an area of strength for the JSE particularly in relation to
employee relations. In line with its drive to retain its employees and optimize employee
capacity, developmental policies such as the employment equity plan, individual skills
plan and a long term incentive and retention scheme for key senior employees have
been put in place. 

The JSE has also made achievements in its implementation of empowerment strategies
with over 60% women and over 54% black employees in the staff complement. In
relation to broad based BEE, the JSE has a 9% direct black shareholding and a black
shareholder retention strategy through the introduction of the black shareholder
retention scheme implemented as part of the JSE's listing in June 2006. The JSE
Empowerment Fund ("JEF") which was also launched as part of the JSE's listing and
qualifies as a BEE shareholder, provides promising black students the finance and
support 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 various
social upliftment initiatives such as:

 Nurturing Orphans of Aids for Humanity, to which the JSE contributes financially;
and
 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 stakeholders
through regular communication sessions, meetings and other engagement processes,
such as:

 Government and authorities -The JSE participates in various bodies such as the
Financial Markets Advisory Board, the Standing Advisory Committee on Company Law,
the Money Laundering Advisory Council and the GAAP monitoring panel.
 Regulators - A Financial Services Board representative is invited to attend all
EXCO and board meetings.
 Customers - customers and brokers are engaged through regular communication
sessions, as well as ongoing communication with data vendors and other clients.
 Local community - JSE communications officers make presentations to schools,
universities and other community groups on a regular basis.
 Staff - feedback meetings, newsletters, intranet and email.
 Investors - following its listing, the JSE has launched an investor relations web
site and is developing an investor relations strategy.

37
In addition, the JSE also maintains contact with its stakeholders through Gazettes to
members, press releases, SENS announcements and the JSE magazine.

Going forward, linkages and strategic partnerships will be explored with relevant interest
groups so as to establish cohesion and value in addressing corporate social
responsibility. 

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 of
emergency protocols, the JSE will look to implement a sound monitoring and
measurement system to assess possible cases and incidents.

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

ECONOMIC SUSTAINABILITY 
Strategic management procedures are also implemented to determine medium and long
term opportunities. Business indicators are implemented through key performance
indicators. Business cases on major innovations particularly related to IT are presented
to the executive management or the Board for approval. The JSE is further committed
to product development and research.

38
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

39
  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 derivative
products. 

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

40
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 (ETF’s) 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 Exchange’s 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 price
risk management for the grains market in South and Southern Africa. More recently, the
Division also offers derivatives on precious metals and crude oil. 

41
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 companies
to 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 director’s 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

42
 JSE LIMITED

BOARD CHARTER

43
 JSE LIMITED
BOARD CHARTER
Index
Page 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

1. PREAMBLE

44
 1.1. JSE Limited (“the JSE” or “the Exchange”) is a public company with a share
capital, duly incorporated on 1 July 2005 for the purpose inter alia of
carrying on the business of a securities exchange.

1.2. The Board of Directors of the JSE regards corporate governance as

fundamentally important to the achievement of the JSE's mission, its
financial objectives and the fulfillment of its corporate responsibilities, and
is accordingly unreservedly committed to applying the core governance
principles of fairness, accountability, responsibility and transparency in all
of the JSE’s business dealings with its stakeholders.

1.3. The Board is the focal point of the JSE’s corporate governance system and
remains ultimately accountable and responsible for the performance and
affairs of the Exchange. It should exercise leadership, enterprise, integrity
and judgment in directing the Exchange so as to achieve the objects set
out in the JSE’s memorandum and articles of association.

1.4. All members of the JSE’s Board of Directors are likewise responsible to ensure
that the Exchange achieves and maintains the highest level of business
conduct.

2. AIM AND OBJECTIVES

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

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

2.3. Whilst this Board Charter of necessity includes references to minimum

acceptable standards of conduct, in pursuit of the ideals underlying this
Charter, the Board recognizes that the JSE, by virtue of the crucial role that
it plays in respect of the economy of South Africa as well as its regulatory
role, sets the benchmark against which companies listed on the Exchange
will measure their corporate governance practices.

2.4. The Board recognizes that with regard to corporate governance, it is critical
that substance prevails over form, and in applying the principles contained

45
 in this Board Charter the Board will be guided by the principles and
recommendations contained in the 2002 King Report on Corporate
Governance for South Africa (“King II”) and established standards of best
governance practice, locally, internationally and as espoused in the JSE
Listings Requirements.

2.5. This Board Charter shall constitute an integral part of each Board member’s
letter of appointment.

3. THE ROLE OF THE BOARD

3.1. Article 28 of the articles of the JSE vests the management and control of the
JSE in the Board which has the powers conferred upon it by the relevant
legislation, the rules of the JSE made in terms of such legislation, and the
JSE’s memorandum and articles of association.

3.2. The Board's primary responsibilities, based on an agreed assessment of levels

of materiality, include giving strategic direction to the JSE, identifying key
risk areas and key performance indicators of the Exchange’s business,
monitoring investment decisions, considering significant financial matters
and risk and, where applicable, industry standards.

3.3. The Board should specifically:

3.3.1. retain full and effective control over the JSE, and monitor
management’s implementation of the strategic plans and
financial objectives as defined by the Board;

3.3.2. Define levels of materiality, reserving specific powers to itself and

delegating other matters, with the necessary written authority, to
management;

3.3.3. Continually monitor the exercise of delegated power by

management;

3.3.4. Ensure that a comprehensive system of policies and procedures is in

place and that appropriate governance structures exist to ensure
the smooth, efficient and prudent stewardship of the Exchange;

46
 3.3.5. ensure compliance with all relevant laws and regulations, audit and
accounting principles, the memorandum and articles of the JSE
and the JSE’s code of conduct, and such other principles as may
be established by the Board from time to time;

3.3.6. Regularly review and evaluate the risks to the business of the JSE
and ensure the existence of comprehensive, appropriate internal
controls to mitigate against such risks;

3.3.7. exercise objective judgment on the business affairs of the Exchange,

independent from management but with sufficient management
information to enable a proper and objective assessment to be
made;

3.3.8. Identify and monitor non-financial aspects relevant to the business of

the JSE, and ensure that the Exchange acts responsibly towards
all relevant stakeholders having a legitimate interest in its affairs;
and

3.3.9. Strive to act above and beyond the minimum requirements of good
corporate governance and benchmark its performance against
international best practice.

3.4. Having regard to its role set out in 3.3 above, the Board has defined the
following as key issues which the Board must consider in the course of its
direction of the JSE:

3.4.1. Reviewing the strategic direction of the Exchange and adopting

business plans proposed by management for the achievement
thereof;

3.4.2. Approving specific financial and non-financial objectives and policies

proposed by management;

3.4.3. Reviewing processes for the identification and management of

business risk;

3.4.4. Reviewing processes for ensuring compliance by the JSE with its
key regulatory and legal obligations;

3.4.5. delegating appropriate authority to management for capital

expenditure and reviewing investment, capital and funding
proposals reserved for Board approval in terms of the delegation
policy;

47
 3.4.6. from time to time, as the business of the Exchange requires,
approving succession planning in respect of senior executive
positions within the JSE and, where appropriate, endorsing
senior executive appointments, organizational changes and high
level remuneration issues;

3.4.7. Overseeing the JSE’s performance against agreed targets and

objectives;

3.4.8. overseeing reporting to relevant stakeholders on the direction,

governance and performance of the JSE as well as other
processes that need reporting and other disclosure requirements;
and

3.4.9. Providing leadership and vision in a way that will enhance value and
ensure the long-term organizational health of the JSE.

3.5. The day-to-day management of the JSE will be vested in the hands of the Chief
Executive Officer (“CEO") and the management team appointed by him.

4. COMPOSITION OF THE BOARD

4.1. The JSE has a unitary Board, consisting of a majority of non-executive Board
members.

4.2. The number of directors is regulated by article 20.1 of the articles of the JSE,
which currently specifies that the Board consist of not less than four (4)
directors, the majority of whom shall be non-executive.

4.3. The appointment process for Board members is prescribed by articles of the
JSE.

4.4. The Board should collectively contain the skills, experience and mix of
personalities appropriate to the strategic direction of the Exchange and
necessary to secure its sound performance.

4.5. Procedures for the nomination to the Board should be formal and transparent.
The Board has delegated its responsibility in this area to a Nominations
Committee, which is responsible for the assessment and nomination of
potential new directors, and the CEO where required.

4.6. It is a fundamental pre-requisite for achieving best practice in corporate

governance that Board members be selected and appointed:
4.6.1. On the basis of the particular skills or experience each Board
member brings to the Board;

48
 4.6.2. The capacity of each appointee to satisfy the competency
requirements necessary for being a director; and

4.6.3. Taking cognizance of the race and gender of the candidate to ensure
the 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 and
recommendations and the ability to contribute an independent
view to matters under consideration and to add value to Board
deliberations;

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

4.7.3. Full commitment to furthering the interests of the JSE in achieving its
goals and, where appropriate, bring the benefit of international
experience to the Board.

4.8. Every director recognizes that his or her primary fiduciary duty is to the JSE as
an entity and not to the constituency on behalf of which that director may
have been appointed. Irrespective of a Board member’s special expertise
or knowledge, all members of the Board recognize that they are collectively
responsible for the performance of the JSE.

5. BOARD LEADERSHIP

5.1. The JSE’s philosophy of Board leadership is premised on the principle that the
running of the Board of directors and the executive responsibility for the
running of the Exchange’s business are two separate and distinct tasks.

5.2. There should accordingly be a clear division of responsibilities between these

two roles to ensure a balance of power and authority, such that no one
individual has unfettered powers of decision-making.

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

49
5.4. The Chairman

5.4.1. The references in this Board Charter to the Chairman shall be

deemed 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 an
ordinary majority of the Board.

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

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

terms.

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

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

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

5.4.9. The Chairman shall be responsible for maintaining regular dialogue

with the CEO over all operational matters and will consult with
the remainder of the Board promptly over any matter that gives
him or her cause for concern.

5.4.10. The Chairman will act as facilitator at meetings of the Board to

ensure 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 under
discussion are solicited and freely expressed, and that Board
discussions lead to appropriate decisions.

50
 5.4.11. The Chairman will seek a consensus in the Board but may, where
considered necessary, call for a vote in which event the decision
of an ordinary majority of the Board shall prevail.
5.4.12. The Chairman shall act as an informal link between the Board and
the CEO, shall be kept informed by the CEO on all important
matters between Board meetings, and shall be available to the
CEO to provide counsel and advice where appropriate.

5.5. The Chief Executive Officer

5.5.1. As determined by article 25 of the JSE’s articles, the non-executive

Board members shall appoint the CEO and set the terms and
conditions of his or her employment contract.

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

5.5.3. All Board authority conferred on management is delegated through

the CEO, so that the authority and accountability of management
is considered to be the authority and accountability of the CEO
insofar as the Board is concerned.

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

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

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

5.5.6.1. To ensure that the assets of the JSE are adequately

maintained and protected, and not unnecessarily
placed at risk;

5.5.6.2. To ensure that comprehensive and appropriate internal

control mechanisms are recommended to and
adopted by the Board in order to mitigate against
key risks;

5.5.6.3. not to cause or permit any practice, activity or decision

by or within the JSE that is contrary to commonly

51
 accepted good business practice, good corporate
governance or professional ethics; and

5.5.6.4. To communicate to the Board, at least annually, the

JSE’s senior management succession planning and
management development initiatives, including
details of the Exchange’s compliance with
employment equity and human capital development
imperatives.

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

5.5.8. Only decisions of the Board acting as a body shall be binding on the
CEO. Decisions or instructions of individual members of the
Board, officers or committees are not binding except in those
instances 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 programme

aimed at facilitating their understanding of the JSE and the business
environment and markets in which it operates. The induction programme
will entail at least the following:

6.1.1. background on the JSE (including its memorandum and articles of

association, ownership rules, regulations and applicable laws,
Board and governance structures, membership, and an overview
of its key policies and processes);

6.1.2. Guidance on the business of the Exchange (business processes,

corporate strategies, organization, management and people and
comparison 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 financial
performance of the business);

52
 6.1.4. a clear identification of reciprocal expectations on appointment (by
way of discussions with the Chairman with regards to the
director’s role, potential contributions and particular knowledge,
the identification of any gaps in knowledge of board or
governance procedures where training may be required, and a
clear understanding of the director’s own expectations from the
Chairman and the Board as a whole);

6.1.5. Familiarization with the JSE’s operations, senior management and

its business environment; and

6.1.6. Formal induction in terms of their fiduciary duties and

responsibilities.

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 an
integral part, together with induction material containing essential Board
and Exchange information.

6.3. There shall be no distinction drawn between non-executive directors and

alternate non-executive directors and the rights and obligations ascribed to
directors in terms of this Board Charter shall apply to alternate board
members duly appointed in terms of articles of the JSE.

7. UNDERTAKINGS BY BOARD MEMBERS

7.1. Every Board member shall:

7.1.1. At all times conduct him or herself in a professional manner, having

due regard to his or her fiduciary duties and responsibilities to the
JSE;

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

7.1.3. Ensure that he or she has sufficient time available to devote to their
duties as Board members. Non-executive directors shall notify
the Company Secretary as soon as practicable after the
acceptance of any additional directorships or external
appointments, following their appointment to the Board of the
JSE;

7.1.4. be diligent in discharging his or her duties to the Exchange and shall
seek to acquire a broad knowledge of the business of the JSE so
as 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 on
which he or she serves and will tender his or her resignation in
the event that the Board Member is unable to attend three
consecutive Board or Board Committee meetings; and

7.1.6. Endeavour to keep abreast of changes and trends in the business

environment and markets, including changes and trends in the
economic, political, social and legal climate generally, which may
impact the business of the JSE.

7.2. Every Board member should, in addition, be aware of and conversant with the
statutory and regulatory requirements affecting the direction of the
Exchange, 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 the

operation and conduct of the JSE.

7.3. Executive Board members shall not accept appointments to the Board of a
Company listed on the JSE (“listed Company”) or a Company that is not
listed 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 and
eligibility of directors for re-election, is imperative to the proper governance
of the JSE.
8.2. Board members have no fixed term of appointment, however in terms of article
24 of the JSE’s articles, one-third in number are required to retire by
rotation annually. All non-executive directors and executive directors are
therefore subject to retirement by rotation at least once every three years in
accordance 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 retire
by rotation, the Board shall seek to maintain the optimum balance between
the need for board continuity and experience, the appropriate mix amongst
directors 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 hold
office until the next annual general meeting, at which they will retire and
become available for election.

8.5. The termination of an employment contract of an executive director will result

ipso facto in the termination of his or her membership of the Board, unless
the Board determines otherwise.

9. REMUNERATION OF BOARD MEMBERS

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

9.2. In deciding on appropriate levels of remuneration, the Board shall be guided by

the principle that whilst levels of remuneration should be sufficient to attract
and retain the caliber of Board members needed to run the JSE
successfully, it should avoid paying more than is necessary for this
purpose.

9.3. A formal and transparent procedure shall be established for developing policy
on remuneration and for fixing the remuneration packages of individual
Board members and no Board member shall be involved in deciding his or
her own remuneration.
9.4. Non-executive Board members shall receive no rights, options nor other
significant benefits from the JSE, other than their directors' fees, which will
be paid as follows:

9.4.1. A basic fee as ordinary remuneration, which includes a retainer and

a fee for attendance at meetings;

9.4.2. An additional fee payable to a Board member who acts as Chairman

of 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 discretion
of 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 her
office.

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 9.6. The Board will review board members’ remuneration annually after taking
independent advice.

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

9.8. The Board is committed to achieving transparency with regard to issues of

remuneration and details of Board members’ remuneration shall be
disclosed in the JSE’s annual report and accounts.

10. BOARD GOVERNANCE

10.1. Board Meetings

10.1.1. Board members will use their best endeavors to attend all Board
meetings and to read all necessary documentation and prepare
themselves thoroughly in advance of Board meetings. Board
members are expected to participate fully, frankly and
constructively in Board discussions and other activities and to
bring the benefit of their particular knowledge, skills and abilities
to Board discussions.

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

10.1.3. The Board should allow every director to play a full and constructive
role in its affairs, within the limitations imposed by the
memorandum and articles of the JSE, all applicable legislation,
and Board and/or share holders’ resolutions specifically
regulating 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 the
Exchange. Comparisons with competitors and best
practice are important elements of this process;

10.1.4.2. Review and approve the JSE’s financial objectives,

plans and actions and significant allocation and
expenditure;

10.1.4.3. review the JSE’s goals and the strategies for achieving
these;

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 10.1.4.4. Approve the annual budget;

10.1.4.5. Approve the preliminary and half-yearly financial

statements, annual report and other reports to share
holders;

10.1.4.6. review the Board’s composition, structure and

succession;

10.1.4.7. review the audit requirements;

10.1.4.8. Review the performance of, necessity for and

composition of the Board’s committees;

10.1.4.9. review remuneration policies and practices in general;

10.1.4.10. review risk management policies and internal controls,

including compliance with legal and regulatory
requirements;

10.1.4.11. Review the JSE’s codes of conduct and ethical

standards; and

10.1.4.12. Review share holder, client and other relevant

stakeholder relations; and

10.1.4.13. Deal with such other matters as may be appropriate.

10.2. Frequency and Quorum

10.2.1. Meetings of the Board will be held at such time and at such venue
as the Board deems appropriate, subject to a minimum of four (4)
meetings per year.

10.2.2. Reasonable notice in writing shall be given to all Board members.

10.2.3. The quorum necessary for the transaction of business is fixed by

the articles of the JSE, which currently are two (2) non-executive
directors and one (1) executive director.

10.2.4. In addition to the rules of procedure set out in this Board Charter,
meetings and proceedings of the Board will be governed by the
memorandum and articles of the JSE.

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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 the
meeting and that all issues requiring attention are suitably dealt
with. The Chairman shall have effective authority over the Board
agenda, however, any Board member may request, through the
Company Secretary, that any matter requiring board deliberation
be added to the agenda.

10.3.3. The Company Secretary must circulate the agenda and other
meeting 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 reasonable

times, to members of senior management and to all relevant
information to assist them in the discharge of their duties and
responsibilities and to enable them to take informed decisions.
Board members shall, however, strictly observe the provisions of
all applicable legislation related to the use and confidentiality of
information obtained by virtue of their position as directors of the
JSE.

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 Company
secretary within two (2) weeks of the date on which the Board
meeting was held, after review and approval by the Chairman.

10.4.2. The Board agrees that the maintenance of the confidentiality of

Board proceedings is of paramount importance. In order to
facilitate the maintenance of confidentiality, all meeting papers
and submissions of a sensitive nature shall be left in the
boardroom on conclusion of the meeting for disposal by the
Company Secretary.

10.4.3. The Company Secretary shall keep records of all Board

submissions and papers, and of all material presented to the
Board together with the minutes of meetings. These records will
be accessible to all directors upon request

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 10.4.4. The Board agrees that the maintenance of the confidentiality of
Board proceedings is of paramount importance, especially given
the price sensitive nature of many of the matters under
consideration. To secure this high level of confidentiality, any
papers 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 may
take independent professional advice, at the expense of the JSE, where
there is doubt as to whether a proposed course of action is consistent with
his or her fiduciary duties and responsibilities.
10.6. Conflicts of Interest

10.6.1. Board members must inform the Board of any conflicts or potential
conflicts of interest they may have in relation to particular items
of business, as soon as he or she becomes aware of such
conflict or potential conflict.

10.6.2. Directors should recuse themselves from discussion or decisions

on matters in which they have a conflict of interest, unless the
Board otherwise agrees.

11. BOARD COMMITTEES

11.1. The Board may form such committees as may be necessary to facilitate
efficient decision-making and to assist the Board in the execution of its
duties, power and authorities. The Board presently has four standing
committees, namely, the Audit Committee, the Human Resources
Committee, the Nominations Committee, and the Risk Management
Committee.

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

11.3. As general principles:

11.3.1. Board committees will observe the same rules of conduct and
procedures as the Board, unless the Board specifically
determines otherwise in the committee’s Terms of Reference;

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 11.3.2. Board committees shall be entitled only to act on behalf of the
Board 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 Board
committees to the Board, except where the Board has otherwise
mandated the committee.

11.4. The delegation of the Board’s authority in certain defined areas to committees
constituted in terms of this cause will absolve neither the Board, nor its
directors, from their respective accountability to ensure the due discharge
of their duties and responsibilities.

12. MATTERS RESERVED FOR THE BOARD

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

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

12.1.2. The adoption of any significant change or departure in the

accounting policies and practices of the JSE and its subsidiaries;

12.1.3. the entering into of any agreement which involves budgeted

expenditure in excess of R2 million, or which involves
unbudgeted expenditure in aggregate exceeding five percent of
the total budgeted expenditure for the year in question, with no
one item of such expenditure exceeding R 500 000;

12.1.4. The approval of annual financial statements and the approval of

interim 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 and
changes in the composition of the committees of the Board as
are 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 auditor

of 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 employment

equity, transformation and diversity issues, environment, health
and safety;

12.1.14. Based on the recommendations of the Risk Management

Committee, the adoption of appropriate risk management and
internal control strategies;

12.1.15. any other power not specifically delegated to the CEO and/or
management in terms of the “Delegation of Powers” Resolution
dated 1 December 2000 (as amended) and annexed hereto
marked “Annexure A”; and

12.1.16. The monitoring of the exercise of delegated powers exercised by

the CEO and/or management in terms of “Annexure A”.

13. BOARD EVALUATION AND PERFORMANCE

13.1. In line with the recommendations of King II, the Board shall Endeavour to
evaluate its performance from time to time and to benchmark its
performance 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 an
annual or such other basis as the Board may determine. The Board shall
likewise consider the implementation of an annual process for the
evaluation 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 Resources
Committee, shall appraise the performance of the CEO, at least annually,
on the basis agreed in terms of the CEO’s employment contract. The
evaluation 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 each
of the Board committees to ensure that their composition, mandate and
authority enables them to provide effective assistance to the Board in the
key 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 consulting
activity designed to add value and improve an organization’s operations. It
helps an organization accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk
management, control and governance processes.”
14.2. The internal audit function is recognized to be an integral part of the
governance structures of the JSE and functions under policies established
by executive management and the Board. It is responsible to both the
Board and executive management, providing them with:

14.2.1. Assurance that the management processes are adequate to

identify and monitor significant risks;

14.2.2. Confirmation of the effective operation of the established internal

control systems;

14.2.3. Ongoing development and evaluation of improved controls;

14.2.4. Credible processes for feedback on risk management and

assurance; and

14.2.5. Objective confirmation that the Board receives the right quality of
assurance and information from management and that this
information is reliable.

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 14.3. The Board must ensure that the internal audit function has the necessary
standing and that it reports at a level within the JSE that allows it to
discharge its responsibilities effectively. Internal Audit should report
administratively to the CEO and functionally to the chairman of the Audit
Committee. In addition Internal Audit should have ready and regular
access to the Chairman of the Board.

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

15. COMPANY SECRETARY

15.1. The Company Secretary is critically important to the proper governance of the
Exchange and it is the responsibility of the Board to ensure that the
Company Secretary remains capable to fulfill the function for which he or
she has been appointed. The appointment and removal of the Company
Secretary 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 integrity
of the Board governance process.

15.3. In addition to the statutory duties of the Company Secretary, he or she must
provide the Board as a whole and the Board members individually with
detailed guidance as to how their responsibilities should be properly
discharged in the best interests of the JSE.

15.4. Particularly in relation to the Board and its obligations as set out in this Board
Charter, the Company secretary shall be responsible inter alia for:

15.4.1. Ensuring that memorandum and articles of the JSE and this Board
Charter are both followed and reviewed regularly, as
circumstances warrant;

15.4.2. Providing a central source of guidance and advice to the Board and
its committees primarily in respect of procedural and compliance
issues, including compliance with statutory regulations and with
King II;

15.4.3. ensuring that each Board member is made aware of and provided
with guidance as to their duties, responsibilities and powers as
directors of the JSE; and

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 15.4.4. Keeping abreast of, and informing the Board of current governance
thinking governance best practice, both locally and
internationally.
15.5. All Board members shall have unlimited access to the Company
Secretary.

16. PROCESS FOR REVIEW OF BOARD CHARTER

This Board Charter shall be reviewed by the Board as and when necessary to ensure that it
remains relevant to the business objectives of the JSE. The Company Secretary in consultation
with the Chairman shall initiate the review process

ADOPTED BY THE BOARD ON

This Board Charter contains the following Annexure:

A: Delegation of Authority Resolution dated 1 December 2000 (as amended)

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