Etienne Nel. Picture: SUPPLIED
Etienne Nel. Picture: SUPPLIED

SA’s financial markets are on the threshold of a new era, following the JSE’s failed attempts to have ZAR X’s exchange licence suspended, with the result that the bourse will no longer be the country’s only regulated stock exchange.

ZAR X would list agricultural group Senwes and its subsidiary, Senwes Beleggings, by the end of February, said CEO Etienne Nel.

He said three companies had approached ZAR X to discuss listings since the ruling was handed down late on Thursday.

"Our [listings] pipeline looks significantly better than it did a month ago," said Nel, who founded over-the-counter (OTC) trading platform Equity Express.

The appeal board of the Financial Services Board (FSB) dismissed with costs two separate appeals by the JSE and 4 Africa Exchange (4AX) against the granting of an exchange licence to ZAR X.

The registrar of security services granted ZAR X and 4AX exchange licences in August 2016.

Judge LTC Harms, the deputy chairman of the appeal board, was critical of the grounds on which ZAR X’s licence was appealed against.

He said it was "striking" that neither the JSE nor 4AX engaged with the reasons given by the registrar for granting the licence, including why it would further the objectives of the Financial Markets Act (FMA).

The FMA seeks to ensure that financial markets promote investor protection and are fair, efficient and competitive.

The JSE was not anticompetitive and would work with rival exchanges to ensure that, as SA moved into a multiple-exchange world, it would still preserve its very high standards, said Donna Nemer, head of capital markets.

ZAR X, however, has reported the JSE to the Competition Commission to investigate whether its multiple appeals amount to an abuse of dominance.

4AX, which Harms said would "compete for much the same market as ZAR X", declined to comment on Friday.

Other than OTC markets, SA has only ever had one regulated stock exchange, founded in 1887.

Many countries, including the US, Germany and the UK, have multiple stock exchanges.

While this has given rise to some abusive practices, such as market arbitrage, there are many benefits.

In most markets where there were multiple exchanges, increased liquidity and efficiency meant it was a win-win for everyone, said Nemer.

Kevin Brady, the CEO of A2X, an alternative exchange in the process of obtaining a licence, said multiple exchanges would enhance market quality and innovation.

Any exchange needed to prevent abusive behaviour, because it would deter investors, he said.

"The industry is ripe for competition," Brady said.

But David Shapiro, deputy chairman of Sasfin Securities, voiced concern.

"Exchanges need vast pools of capital and high levels of trade to be viable. Our exchange is languishing [and] falling behind other markets in innovative stocks, [which makes] it more difficult to attract trade," said Shapiro, who joined the stock market in 1972.

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