A2X Markets, a South African stock exchange that operates an alternative trading platform for listed securities, said yesterday that it had successfully grown its trade value from just R657 million in trade value in its first year in 2017, to more than R75 billion six years later.
The original bourse - the JSE - has been given a run for its money by industry participants, such as the A2X Markets and Cape Town Stock Exchange (CTSE).
A2X is an authorised stock exchange that offers a complementary platform where companies can secondary list their shares for trade and provides a company’s shareholders with the opportunity to save money when they transact by taking advantage of the platform’s low fee structure, narrower spreads and increased liquidity.
A2X CEO Kevin Brady said, “A2X’s growth could not have been achieved without the support of our brokers and issuers who have backed competition. We are proud to be playing our part in growing the markets in South Africa and the savings pool for all investors.”
“Internationally, competition in the exchange space has been a driving force for innovation, price improvement, and the enhancement of services offered to customers. The presence of multiple trading venues leads to a more robust, efficient and diverse financial markets and benefits for investors.”
A2X said its trade count had increased significantly as additional brokers connected to more than 1.2 million trades taking place in the last year, up from 213 000 in 2021/2022.
A2X said it had added 88 securities to its list of issuers from October 2022 to October 2023 bringing the total to 183 with a combined market capitalisation of about R9 trillion. The new listings include REITs, ETFs and well-known South African companies, 13 of which are Top40 constituents. A2X now had 31 of the Top40 constituents.
“A2X calculates that the current savings pool made available to the market over the past 12 months to be around R900 million. If all companies were listed on A2X, we estimate this number would be over R1.3 billion a year,” it said.
Meanwhile, A2X said independent research carried out by BMLL, a leading independent global data and analytics provider, showed that the benefits of competition in jurisdictions like Europe, Australia and the US were manifesting in South Africa with A2X Markets.
BMLL research studied 30 Top40 constituents that had a listing on both A2X and the incumbent exchange, to measure the positive impact A2X has had on financial markets in South Africa.
Brady said, “Independent research confirmed that competition in any industry is good for everyone. A2X is growing the marketplace and the savings pool for all investors in South Africa. We calculate the potential savings that A2X makes to the market to be around R900 million a year. If all companies listed on A2X, we estimate this would grow to R1.32 billion a year.”
However, currently companies are not able to raise capital on A2X as is a multilateral trading facility (MTF) providing retail investors with an alternative platform to trade financial securities.
“Going forward, A2X plans to investigate expanding both geographically and from a product perspective. At that point, IPOs (initial public offerings) will be investigated and considered for implementation if appropriate,” it said on its website.
As A2X is growing, the JSE has seen a spate of delistings, which is leading to lower trading volumes on the bourse.
This despite the JSE’s Simplification Project, which aims to simplify the Listings Requirements using plain language to record concise regulatory objectives, allowing better understanding and application of the requirements by listed companies, sponsors, investors.
However, this might not be enough to stem the flow.
In several recent JSE-listed financials, including African Rainbow Capital and Sasfin, company executives have raised the question of whether it still was practical to remain listed on the JSE as their companies were trading at a sizeable discount to net asset value, while a spate of others have announced their intentions to delist.
AmaranthCX director Paul Miller expects that more than 27 companies would delist in 2023.
Andrew Bahlmann, the CEO: Corporate and Advisory, Deal Leaders International South Africa, in an article in Business Report last month, “The vicious cycle sabotaging SA’s investment markets”, said, South Africa’s investment markets, particularly the JSE, are caught in a negative feedback loop driving foreign capital away and impairing the country’s economic growth prospects.“
Bahlmann said as stock valuations eroded, companies struggled to justify the rising costs of remaining listed on the JSE. These mounting expenses, such as regulatory compliance fees and ongoing reporting requirements, disproportionately impact smaller companies, reducing profitability and deterring potential listings.
This led to companies either refusing to list or deciding to delist, seeking alternative markets to enhance liquidity and attract capital, a trend which has been in ample evidence on the JSE in recent years. This all added to an unattractive investment climate resulting from lower valuations and higher costs.
BUSINESS REPORT