THE BOTTOM LINE
Competition from little guys forces JSE to jack itself up
Smaller stock exchanges have pushed the JSE to lower costs, cut unnecessary costs and improve its IT systems
Of the four new stock exchanges licensed in recent years – ZAR X, A2X, 4AX and EESE – A2X has had the most success attracting new listings, announcing its ninth company on Tuesday.
The new exchanges have different strategies and licences, which perhaps make it unfair to compare them directly.A2X, for example, is targeting heavyweights on the JSE for secondary listings on its exchange; the licence conditions of EESE, on the other hand, only allows it to list restricted shares, making it suitable for empowerment schemes.
4AX is targeting companies with a market cap of between R100-million and R8-billion.
It’s early days, but so far A2X is the undisputed frontrunner, counting Sanlam, Coronation Fund Managers and African Rainbow Capital – also a shareholder – among its secondary listings.
That one can still count its number of listings on two hands shows just how difficult it is to take on an incumbent in a highly regulated market. Not only do you need to convince the issuers that your exchange will be worth their while, but also brokers, vendors and, perhaps most importantly, investors.
A2X, which is led by Investec veteran Kevin Brady, believes competition between exchanges also helps to open up and grow the market, boost liquidity, and improve the price discovery process.
In SA’s investment world, competition has forced the JSE to lower costs, cut unnecessary costs and improve its IT systems. For that, the new exchanges – and the shareholders who back them – already deserve a Bell’s.