Nicky Newton-King would prefer I didn’t write about personal stuff. I’m not sure that includes details about the first time I met her. It was 18 years ago at the Milpark Hospital and she had come to visit someone I was visiting, ostensibly to talk about a corporate transaction they were both working on, for different sides.
There was little urgency about the transaction but Newton-King visited regularly to talk about it. Those who know nothing of the bleak monotony and disempowerment that inevitably characterises prolonged hospital stays may not appreciate what it was she was up to. Newton-King was helping to create the comforting impression that things were normal.
Anyway, given Newton-King’s stated preference, I won’t dwell on that; and I only bring it up because it goes to one of Newton-King’s two defining characteristics: compassion and enthusiasm.
Back then Newton-King was a partner at law firm Webber Wentzel working in its financial services unit. She had joined Webber’s in 1994 after she had obtained an LLM degree with first-class honours from Cambridge University. The Cambridge stint followed a BA LLB from the University of Stellenbosch. Newton-King, who is nothing if not driven, says she reckons she was born a lawyer and knew from “a very young age” that was what she was going to be.
While at Webber’s, Newton-King was involved in working with the JSE and advising it on its upcoming deregulation, the equivalent of the “Big Bang” at the London Stock Exchange (LSE).
She was also involved in the extensive amendment of the JSE’s rules and listings requirements.
So the move to the JSE in June 1996 might have seemed inevitable at the time. She arrived, into what was a male-dominated environment, just one week before the trading floor was closed and trading switched to screens. It marked the beginning of a long period of dramatic change.
As one major JSE client remarks, under the very impressive leadership of Russell Loubser, the JSE was dragged kicking and screaming into the 21st century as the trading floor closed and the exchange was demutualised. “Twelve years ago the JSE was almost bankrupt because it relied on the levies of its members, demutualisation freed the exchange from the handcuffs of being owned by the broker members.”
Newton-King, who was appointed deputy to Loubser nine years ago, played a critical role in overseeing the massive changes. However, at no stage during all these years did she assume she would get Loubser’s job. “It was always made clear to me that I had no divine right to the job, so I kept training and upgrading my qualifications.” She admits she would have been very disappointed if she didn’t get it and would probably have gone somewhere else “where I could lead”.
When I first caught up with Newton-King last November to talk about the appointment, as the first-ever female chief executive of the 123-year-old JSE, she was still obviously troubled by the forced resignation of one of her key executives. The departure of Allan Thomson, the JSE’s head of derivatives, had been announced a few weeks earlier following an investigation into irregular share trading on his own account. Ironically, the incident, which was described by the Financial Times as a “rare embarrassment for the JSE”, seems to have served to highlight just how tough a regulator the JSE is.
Thomson, who acknowledged he deserved to be fired, had been using his own account to force traders to operate more honestly. “He was a very treasured colleague and it was very unfortunate that we had to take tough action, but we run regulated markets and we are constantly ensuring that our clients are sticking to the rules… he gave us no choice,” explained Newton-King.
And so the incident may in fact help to secure the JSE’s position at the top of the World Economic Forum’s (WEF) ranking of global security exchanges. The WEF’s 2012 Competitiveness Report marked the second consecutive year that the JSE has been ranked first out of 142 countries.
Newton-King is evidently pleased with the JSE’s showing in the international rankings table but seems intent on spreading quite widely any attendant glory. “Our clients are not always trying to push us to places we don’t want to be; people aren’t trying to challenge us all the time.”
She believes that it is similar for the bank regulator in South Africa. It also helps that the JSE is not as large as many of the global players. “We’re not at the edge so we get the chance to see what does and does not work.” Quickly adding: “We’re highly sophisticated.” Newton-King believes that South Africans, including their bankers, tend to be more risk averse. In regulatory terms it also helps that the JSE is the only exchange in the country as she believes, the fragmentation of exchanges in other countries has aggravated the challenge facing regulators.
Without the high degree of sophistication and regulation it is unlikely that the JSE, even as an effective – although not statutory – monopoly, would get the sort of volumes it does from local investors. “If it wasn’t working for locals it certainly wouldn’t attract foreign investors,” remarks Newton-King who points out that 30 percent of daily volumes are foreign-sourced.
The involvement of foreign investors could have had some grim consequences back in 2008 when major markets across the globe went into meltdown mode.
Lehman’s, whose collapse triggered the meltdown, was the biggest derivatives player in the local market. However, the fall-out was contained thanks to the systems that were in place.
When I suggest that some controls should be placed on international flows to protect the local market from extreme movements, Newton-King, an enthusiastic supporter of the free market, is unequivocal: “We have a market that is easy to enter and easy to exit and that is the way it should be… it is not good to interfere with the market, it will correct itself.”
The sophisticated systems and tight regulation are probably most evident in the way the JSE handles information.
As the life-blood of both companies and markets, the integrity of the information and the speed with which it is exchanged determines whether or not the JSE thrives.
At its most dramatic, this is seen in last year’s decision to bring the JSE’s trading engine back to Johannesburg from London where it has been based the past eight years and provided the JSE with access to world-class technology. Last year the JSE lost connectivity with the LSE on a number of occasions and trading came to a halt. It was a nerve-wracking time for the JSE. The new trading engine, which will be put into use later this year, will be 400 times faster than the current system and will not be susceptible to connectivity breaks. In this environment nano-seconds are as important as they are to Olympic athletes.
The other aspect of information is the regulatory aspect and the issue of precisely how much information should companies be obliged to disclose. There are signs of growing frustration about the disclosure demands being made by International Financial Reporting Standards, the Companies Act, the King Code and the JSE’s own listings requirements.
“We must regularly review the level at which we pitch regulations, regulation comes at a cost and we can’t continually burden companies without reviewing the process,” says Newton-King before adding: “but when people are taking the public’s money, they have responsibilities. What’s the right balance?
“Disclosure is an important tool but are we driving the right behaviour or just creating an information dump that most ordinary people struggle to deal with?” Getting the balance right, is what it’s all about.
Two months into the new job I return to Newton-King to ask how it’s going. Perhaps being the boss is not as much fun as she’d expected. “I’m enjoying every minute of it,” she says without hesitation. “But after 15 years it is important to step back and see if you are doing what you should be doing and to try and determine what the environment will be like in five years’ time.” And so the new leader is involved in regular strategy meetings with her team.
She’s also involved in school functions and market gardening. But Newton-King would prefer me not to talk about the three wonderful men in her life. - Ann Crotty