New stock exchange to launch in SA

ZAR X has been issued a stock exchange licence by the Financial Service Board (FSB). This will be the first stock exchange to be launched in South Africa in over 100 years. Currently, the only stock exchange in the country is the Johannesburg Stock Exchange (JSE).

The licence will allow ZAR X to operate as an independent and fully-fledged stock exchange. The new stock exchange will provide companies wanting to list their securities with a licensed exchange with an alternative to the JSE. The ZAR X Stock Exchange is expected to commence trading on 1 September 2016.

The conditional licence

According to a statement released by the FSB, a licence has been conditionally issued to ZAR X subject to the exchange’s compliance, to the satisfaction of the Registrar of the FSB, to a number of conditions.

Among the conditions that need to be met are the following:

•          Operations are to commence no later than 31 August 2016.
•          Prior approval must be obtained from the Registrar for the approval of a suitable auditor acceptable to the Registrar prior to commencement of operations and by no later than 31 August 2016.
•          A chief technology officer and chief financial officer must be appointed prior to commencement and no later than 31 August 2016.
•          In the event of change in management of ZAR X and where management is replaced by a new person or any change occurs in the personal circumstances of a member of the management team, which renders such member to no longer be fit and proper, no such person may be permitted to take part in the management of ZAR X unless such person has been verified to be fit and proper.

In addition to these conditions, among others, ZAR X will also be required to provide the Registrar with monthly reports detailing the progress of ZAR X in complying with the conditions.

Trading on ZAR X

ZAR X CEO Etienne Nel explained that through this new exchange “investors are able to trade securities across a state of the art technology platform that permits transactions to be executed on a T+0 or same day settlement of trades.”

Currently, there is a timeframe of T+5 or five days between matched trade and settlement, and clearing into the investor’s account. According to the exchange, ZAR X reduces the settlement risk as all transactions are pre-funded. Furthermore, investors are able to carry out trading via their mobile devices.

“We are also make investing simpler and affordable for the public – especially the lower income groups,” stated Nel.

ZAR X was established with the key idea being able to foster the financial inclusion of lower income consumers, as well as to encourage a savings culture. Until now, this segment of society has been largely excluded from the investing and stock exchange industry, according to ZAR X.

Nel highlighted: “ZAR X have no historical practices and legacy systems which drive up costs and slow down transaction times. Our platform is specifically designed to give businesses a flexible, transparent and affordable way to list their shares. In particular, the exchange is especially well positioned to facilitate listings of restricted share schemes, currently trading OTC (over-the-counter), which the FSB ruled were in contravention of the Financial Markets Act.

“A more flexible and practical listings process will ensure greater simplicity and less complexity for companies making use of the ZAR X Stock Exchange.”

Nel added: “The FSB licence ushers in a new era in which the barriers to full economic participation by previously excluded sectors of the population are significantly reduced.

“The emergence of the ZAR X Stock Exchange is a signal that the rigid structures of the past are being dismantled, helping to clear the way for new entrants to the formal economy, especially black investors and entrepreneurs who are eager to make a bigger contribution to job creation and wealth generation.”

What is available?

According to ZAR X, there are three boards available to issuers (i.e. the companies listing shares and/or stocks on the exchange). These are:

1.        A main board for company listings. This offers compliance documentation at a reduced rate compared to the traditional model using a principles-based, rather than a rules-based, dispensation.
2.        A ‘restricted market’. This is “a formalised version of previous OTC platforms for the trading of BBBEE shares and other securities that can only be bought and sold within a limited marketplace where issuers require some control over the liquidity in their shares,” explained ZAR X.
3.        An investment products market. This is a platform for the trading of structured products and preference shares.