New stock exchange gets the green light

JSE in Sandton. Picture: Dean Hutton
JSE in Sandton. Picture: Dean Hutton

ZAR X, the first of three new would-be stock exchanges in South Africa, says it already has listing commitments from eight existing companies that are trading their shares “over the counter”.

According to ZAR X CEO Etienne Nel, this already represents a market capitalisation “well north of R10 billion”.

ZAR X’s exchange licence was conditionally approved by the Financial Services Board (FSB) on March 8, but it only made a press announcement this week.

There are two applications still in the works – 4 Africa Exchange (4AX) and 2AX.

Only 4AX will be a direct competitor to ZAR X, while 2AX is aiming to create a special market for secondary listings for companies that are already on a stock exchange.

Both ZAR X and 4AX have indicated they are chasing the existing issuers using “over-the-counter” trading platforms, including a number of well-known broad-based BEE schemes.

The Financial Markets Act, which became law in 2013, made these platforms illegal, but many still exist and are kept running thanks to temporary exemptions granted by the FSB.

This week, the FSB released the full list of conditions that ZAR X still has to meet.

The major condition is that ZAR X must be ready to operate by the end of August.

ZAR X also has to address its concentrated ownership.

One shareholder, Gulf Star Commerce, owns 40%, but the law limits any one shareholder in an exchange to 15%.

Nel said that they were applying for permission for Gulf Star to keep the large share on the basis that it was a BEE vehicle.

ZAR X’s target market, apart from over-the-counter companies, is companies worth between R500 million and R5 billion.

The major marketing promise is that ZAR X will be simpler and cheaper than the JSE.

One difference is that the stockbrokers will not need to be registered stockbrokers – a condition set by the JSE.

Instead, ZAR X will allow a broader spectrum of certified financial professionals to play this role.

ZAR X will also require far less stringent compliance to governance rules than those the JSE insists on.

It will follow a “principles-based” rather than a “rules-based” system.

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