A2X CEO Kevin Brady. Picture: SUPPLIED
A2X CEO Kevin Brady. Picture: SUPPLIED

A2X Markets, which launched in October 2017 and is one of several new exchanges in SA, has added the first index-tracking funds to its trading platform amid growing demand for low-cost passive investment products.

A2X, which provides a platform for secondary stock listings and competes for trading volumes by charging lower transaction fees, was granted approval to also secondary list exchange-traded funds (ETFs) and exchange-traded notes in February.

It said on Thursday Absa’s corporate and investment banking unit would secondary-list three JSE-listed metal ETFs from next Thursday. The ETFs to be listed are NewGold, NewPlat and NewGold Palladium, which track the rand price of gold, platinum and palladium, respectively.

The NewPlat ETF is the largest of the three with a market capitalisation of R12.5bn.

The ETFs will retain their listings on other exchanges, including the JSE and Namibian Stock Exchange.

“ETFs are cost sensitive, and by adding a secondary listing, it allows our investors to capture not only the direct saving of lower transaction fees but also the indirect savings that accrue as a result of narrower spreads and increased liquidity,” said Chris Edwards, head of prime services and index solutions at Absa Corporate and Investment Bank.

“ETFs are experiencing significant growth due to their low cost and we are pleased to be able to extend our offering to include these products,” said A2X CEO Kevin Brady.

The three ETFs account for more than 30% of the value of all ETF funds listed in SA, according to Brady.Trading them on A2X, rather than the JSE would reduce exchange fees for brokers by about 50%, Brady said, citing average end-to-end transaction costs on A2X being 0.64 basis points.

These savings may be passed on to investors via lower brokerage fees, he said. “Lower fees also drive a better quality market by narrowing spreads and increasing liquidity, so often the best bid and offer price rests on A2X.” 

A2X remains tiny compared to the JSE, but trading volumes have grown steadily over the past year.

The value of trades on A2X rose to R726.7m in the first half of 2019, from just R6.1m a year before, Brady said. More than 20 JSE-listed companies are now also listed on A2X.