Eckehardt Ficinus’s letter refers (“How do these new bourses manage to survive?”, February 14). It is evident from the cancellation of the ZAR X licence by the Financial Sector Conduct Authority that starting a stock exchange as a competitor to a 135-year-old monopoly is a capital intensive and arduous process.
This has been complicated by the local regulatory environment, with the Financial Market Act of 2012 only envisioning competition in the exchange space on a simple stand-alone basis and not as the world actually operates, in a complex multi-listing interoperable ecosystem.
Fortunately, A2X has supportive shareholders with deep pockets who have an appetite to see the journey to completion. They recognise that going against the JSE was not going to be easy or quick. One of our key shareholders is African Rainbow Capital (ARC), an investment company connected to Patrice Motsepe. We do not understand why Ficinus finds this connection to be sinister and worrying given that ARC has investments in many financial services companies, including a bank.
A2X has based its model on the multilateral trading facility model that is prevalent and has been successful in Europe, Australia and the US for more than 15 years. This model is a secondary listing model focused on providing an alternative trading platform for shares and exchange-traded products that are listed, regulated and traded on another approved exchange.
The benefits of this model include cheaper trading costs, increased liquidity and the ability to buy and sell securities at a better price, which are all great for the end investor. As A2X grows, these benefits are becoming more evident and substantial.
It’s worth noting that a significant number of companies listed on the JSE are actually secondary listings and rely on the regulatory oversight of another exchange, much like A2X. In fact, out of the 10 largest companies by market capitalisation that are listed on the JSE, six are secondary listings. Of the 300 or so companies listed on the JSE, about 68 are secondary listings.
Technology has facilitated competition at an exchange level. Through the use of technology it is no longer necessary for an exchange to have a large staff complement and expensive brick-and-mortar infrastructure. These lower friction costs make it possible for exchanges like A2X to be true disrupters and compete successfully. A2X uses internationally renowned trading and surveillance technology from London-based Aquis Technologies, which is one of the fastest and most robust technologies used in Europe.
A2X currently has 94 listed securities with a combined market capitalisation of about R6.8-trillion. This makes it the second biggest exchange in Africa by market capitalisation — not bad for an exchange that has only been in existence for five years.
Competition in any industry is positive but specifically among stock exchanges, where it results in reduced costs, better pricing, increased liquidity, greater innovation and better customer service.
The CEO of one prominent listed company, when explaining why he was supportive of A2X, stated that he has yet to come across an industry where competition was not a good thing for the end user.
Head of legal & regulation, A2X
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