JSE
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JSE c e l e b r a t es 125 years
In November the JSE celebrated 125 years of trading. South Africa Magazine investigates.
By Ian Armitage
T
he JSE describes itself as the “engine room” of the South African economy, enhancing job opportunities and creating wealth. It is the16th largest securities exchange in the world, and by far the largest of Africa’s 22 stock exchanges. Now South Africa may not be getting much good press of late but its stock market remains promising. Indeed, since wildcat strikes erupted across the country, the image of South Africa has been damaged thanks to a number of negative headlines. However, the country’s equity and bond markets bucked the trend, at least until November, with the JSE hitting new highs in October. 2
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So why is that? Well, South Africa offers investors frontier markets-type growth, but with more liquidity, more mature capital markets, greater data richness and greater transparency. Although markets such as Nigeria, Kenya, and Ghana hold great potential for sustained high growth, South Africa is the most mature stock market on the continent. Stocks that stand out are British American Tobaco and MTN - year-to-date both are up by at least 30 percent on 12 months ago. Interested in investing? Then you need the JSE. ‘South Africa is credited with being one of the best regulated and most liquid emerging markets, as well as being Africa’s largest by far,’ the Financial Times’ Andrew England recently
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reported, adding, ‘Many of its companies offer exposure to the much-touted Africa growth story, even if the domestic South African investment climate is struggling.’
Happy birthday JSE In November, the stock exchange celebrated 125 years of trading. As you would imagine, it has come a long way over the last century and particularly in the last 25 years. Ranked amongst the top 20 exchanges worldwide in terms of Equity Market capitalisation, the last 25 years have seen the JSE Group acquire the South African Futures and Bond Exchanges, bring innovative products to investors on all its markets and diversify its range of services. “From our humble beginnings, today the JSE’s total Equity Market capitalisation is over R6 trillion with about 400 companies and 907 securities (including interest rate; currency, financial and commodity derivatives) listed. Our emphasis in the last ten years has been to build a robust vertically and horizontally integrated market that offers our clients the opportunity to trade a wide range of products in a world class environment. South Africa has for three consecutive years been ranked number
one in the world in terms of securities regulation by the World Economic Forum,” says Humphrey Borkum, chairman of the JSE. “Naturally, the success of these efforts is also due to the substantial contribution that our clients have made over the years. We look forward to working with our clients to grow our market in future,” JSE CEO Nicky Newton King adds. To recognise this milestone, in August, the JSE donated R50,000 to Business Arts South Africa (BASA) for the Three2Six art programme which runs a holiday art programme for vulnerable refugee children at Sacred Heart College in inner city Johannesburg. “Over 125 years, the JSE has become a critical part of the South African economy. Our industry has an important role to play in the funding of the future development of this country and we are excited by the prospects this holds,” concludes Newton King.
South Africa is credited with being one of the best regulated and most liquid emerging markets, as well as being Africa’s largest by far
Introduction of Quanto Futures In October 2012, the JSE expanded its commodities product range by adding silver and platinum commodities to its gold, copper and Brent crude Quanto Futures. A Quanto Future is a rand denominated commodity www.southafricamag.com
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investment product that delivers the same payoff as a pure dollar denominated commodity investment and enables investors to gain exposure to price fluctuations in the foreign commodity while shielding them from movements in the rand and US Dollar exchange rate. The JSE has partnered with Rand Merchant Bank (RMB) as the initial market maker with the commodities referenced as part of the JSE’s existing licensing agreement with the CME Group. Chris Sturgess, Director of the Commodities Division at the JSE says, “The JSE is excited to offer derivative market participants this additional choice of energy and metal products in the form of Quanto Futures, yet another innovative product offered by the JSE making it that much simpler for local investors to gain access to the international commodities markets. ”
New trading platform allows faster transacting The JSE has been bold in restructuring in the light of increasingly tough global competition, adopting new technologies and outsourcing aspects of its business. As part of that, it recently moved it trading platform from London back to Johannesburg. “Speed is becoming increasingly important in the exchange industry due to exchanges having to cope with the rapid rise of automated trading,” says Leanne Parsons, Director: Equity Market. “Exchanges that have trading systems with the lowest latency will retain and grow market share. “ In a move that was welcomed by market participants, the JSE launched the equity trading platform, Millennium Exchange™, in July. This has resulted in increased levels of performance, functionality and capacity. A major benefit of the system is that speed has been increased and market participants can now perform transactions at 400 times faster. “There is anecdotal evidence to suggest that when exchanges increase their trading speeds they also boost levels of trading. This is important in order to deepen a market,” says Parsons. According to Parsons, the system has enhanced operational efficiencies and stability and has eliminated the problem of international 4
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Naturally, the success of these efforts is also due to the substantial contribution that our clients have made over the years. We look forward to working with our clients to grow our market in future
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connectivity link failures, which previously required the JSE’s equity market to be halted on various occasions. This has further led to improved service availability and stability for the exchange’s clients. “A major way in which changing requirements from JSE Equity Market clients have been addressed is through increased flexibility,” Parsons says. “The system allows for the implementation of countryspecific measures. This essentially entails looking at what is needed and appropriate for the South African market specifically. Different ways of matching and conducting negotiated trades can be facilitated through the central order book. This allows clients to choose products that are best suited to their specific business models thus eliminating a one-size-fit all approach.”
The platform is housed within the JSE’s recently completed new state of the art data centre based on Tier 3 specifications and is designed to ensure 99.98 percent availability. “As we have seen with the Borsa Italiana migration and similar migrations during the past year, the new platform provides exceptional levels of performance, functionality and capacity. The JSE’s move to the new equity system, which we have nicknamed Project Jaya meaning ‘victory‘ in the language of Sri Lanka, is a victory for the market,” Parsons concludes. This provides the JSE with a platform to grow trading volumes and is but a fraction of new and exciting developments on the exchange. END To learn more visit www.jse.co.za www.southafricamag.com
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