South Africa’s newest stock exchange A2X Markets made its debut on Friday with three secondary listings and four of the industry’s leading brokers on board.
Financial services companies, African Rainbow Capital Investments (ARCI), Peregrine Holdings and Coronation Fund Managers are the first counters to take advantage of a secondary listing on the new bourse.
A2X chief executive, Kevin Brady, on Friday said that the issuer pipeline was strong with a significant corporate interest in a secondary listing on the bourse.
“In addition, we are working closely with many of the remaining top ten stockbroking firms to have them signed up before the end of the year. We are thrilled to kick off with such high calibre issuers and brokers and thank them for their support.”
“By using the latest technology and free of the legacy business practices that hamper efficiency, we have been able to materially reduce the cost of transacting and this benefits all participants including the end investor and pensioner,” Brady said.
A2X competes directly with the JSE and provides an alternative platform for companies to secondary list and trade their shares.
The stock exchange said leading stockbrokers RMB Morgan Stanley, Peregrine Securities, Investec Securities and Avior Capital Markets had been approved, while Nedbank Securities, SBG Securities and Sinayo Securities have applied and look set to follow shortly.
The entry of A2X means South Africa now has three new stock exchanges in the form of ZAR X, 4AX – plus the Johannesburg Stock Exchange (JSE).
ARC’s joint chief executive, Johan van der Merwe, on Friday said that one of the main draw cards of an A2X listing was the potential for improved liquidity.
“Even though we are shareholders in A2X, we understand the value that a secondary listing brings to our company and we believe in free market principles that allow companies to grow and flourish,” Van der Merwe said.
Earlier this year, the Patrice Motsepe controlled investment vehicle ARC bought an initial 20% stake A2X.
The terms of the transaction terms allow ARC to increase this equity stake to 25% following the company securing its exchange licence. In April the exchange was granted an Exchange Licence with an infrastructure to clear by the Financial Services Board of South Africa (FSB).
Brady said that A2X’s business model was dependent on throughput – the more trades processed via the exchange, the greater the revenues for A2X.
“A2X’s model aligns with the objective of growing the overall market in South Africa – lowering costs, improving liquidity and being both innovative and responsive to market needs.”
The new exchanges look set to disrupt the JSE’s multi-year monopoly. Numerous exchanges are not unique to South Africa, India has 21 stock exchanges, China and Russia each has four.
Peregrine Holdings acting chief executive, Rob Katz, on Friday said that the company expected its A2X listing to enable better price discovery and to broaden the base of shareholders, given that trading costs on A2X were significantly lower.
“Peregrine Securities is a key player in SA capital markets and therefore if we are supporting the initiative from a trading perspective, it made sense to support A2X from a listing perspective too,” Katz said.