Trading in shares and other investment instruments on the stock market has received a major shake-up with the launch of alternative exchanges that are competing with the JSE
Until recently, the Johannesburg Stock Exchange (JSE) was the only exchange in South Africa – but in the past two years, the industry has seen the entry of four alternative exchanges that will give shareholders new trading platforms. The new platforms are A2X, ZAR X, 4 Africa Exchange (4AX) and Equity Express Securities Exchange (EESE). All were issued with trading licences by the Financial Sector Conduct Authority, previously known as the Financial Services Board.
While they target different markets and sectors, the overall aim is to make it cheaper for shareholders to trade shares, and to make equity investments more accessible.
A2X | www.a2x.co.za
The fastest-growing exchange, A2X started trading in October 2017 and has 15 companies listed on the platform, with a combined market capitalisation of more than R600-billion. It provides a secondary listing for companies listed on the JSE. Currently, it can list only equities, and no debt or derivatives. A2X boasts listings from many of the key sectors, including mining, banking, property, FMCG, financial services, insurance and telecommunications.
A2X allows companies to list for free. It makes its money through transaction fees charged to brokers. “As A2X gains greater traction, more companies are seeing the benefits that a secondary listing can bring to their shareholders,” says A2X CEO Kevin Brady. “Not only does it provide an alternative venue on which to transact, but the low fee structure also drives significant savings for the end investor because it creates a better-quality market by narrowing spread and attracting new liquidity.”
ZAR X | zarx.co.za
ZAR X, which went live in February 2017, uses disruptive fintech to create a more efficient market for all. It believes that the right technology can remove barriers, reduce costs and save time, all while creating new opportunities. ZAR X has developed technology that’s intuitive, easy to use and visually engaging to replace manual processes that hinder efficiency and performance. ZAR X’s focus is on companies the JSE cannot list, and it’s targeting companies worth between R500-million and R5-billion.
A big cost advantage for investors is that there will be no custody fees – i.e. fees paid by investors towards brokers who execute trades on their behalf. Although there will be brokers on ZAR X, investors do not have to execute trades directly through them, but can instead log their trades via a call centre, online or through a mobile app that will soon be available.
4AX | 4ax.co.za
4AX also commenced operations in 2017, and has secured a number of listings with a total market cap of about R6-billion. It is the only new exchange that has a licence to trade across all asset classes. These include all classes of preferential shares, debentures (unsecured loan certificates issued by a company) and bonds (loans made to large companies or government institutions such as municipalities). It is focusing on companies with a market cap of between R100-million and R8-bilion.
4AX believes that increased competition in the exchange environment is critical to providing tangible consumer access to a more cost-effective equities trading platform.
EESE | eese.co.za
Equity Express Securities Exchange, which was granted an exchange licence in September 2017, is targeting broad-based black economic empowerment (B-BBEE) schemes and smaller companies. It is the first majority black-owned equity exchange, and recently listed four B-BBEE schemes on its platform. These include Multichoice’s Phuthuma Nathi BEE share schemes as well as Media24’s Welkom Yizani.
WORDS Thabiso Mochiko