JOHANNESBURG – The National Treasury and JSE have moved to enhance transparency in the South African government bond market with the launch the country’s first electronic government bond trading platform.
Three of the major banks in South Africa signed up as primary dealers on the new platform.
Standard Bank, Nedbank and Absa joined Citibank, Deutsche Bank, HSBC, Investec, JP Morgan and RMB in being liquidity providers for the new platform.
The JSE in partnership with the Treasury and a multi-stakeholder group consisting of Strate, the Financial Sector Conduct Authority yesterday officially launched the electronic trading platform (ETP) for government bonds.
Donna Nemer, a director of capital markets at the JSE, said the launch of the ETP for government bonds had positioned South Africa’s capital market infrastructure among the most sophisticated in the global capital markets.
“A more sophisticated market infrastructure benefits issuers, investors and further positions South Africa as an attractive investment destination,” Nemer said.
“The launch of the Bond ETP was also an important element of South Africa’s commitment to Capital Markets reform at the G-20 group of nations.”
The government entities issue bonds and list them on the JSE to raise funds for large infrastructure projects, such as power stations, roads and hospitals. Investors lend money to these entities by purchasing the bonds.
Transparency
The exchange said the ETP would provide transparency, price discovery and settlement assurance to allow issuers to transact anonymously, both pre-trade and post-trade.
In 2012, the Treasury formed an industry-wide committee called the Bond Market Development Committee, whose mandate was to consider developmental issues facing the South African bond market.
As a result of the work undertaken by the committee, and collaboration with the World Bank, the Treasury decided to implement the ETP.
Mondli Gungubele, the deputy minister of finance, said the launch was a testament to what can be achieved when the government and the private sector worked together to achieve a common purpose. “The use of electronic trading platforms has shown notable positive effects in the secondary markets including improved liquidity through price discovery, reduced transaction costs and greater competition, increased transparency, and lower trading costs,” he said.