A2X Markets, the alternate exchange that began trading in October 2017 with just three listings, plans to attract secondary listings from all JSE top 40 counters by 2023, a move it says could save the asset management industry more than R1bn a year.
The Johannesburg-based exchange now has 37 listings with a total market capitalisation of R2.2-trillion, of which nine are among the JSE top 40.
The nine are Naspers, Sanlam, Exxaro Resources, Growthpoint Properties, Nepi Rockcastle, Mr Price, Standard Bank, Aspen and Sasol.
In addition, A2X plans to boost its trading volumes from less than 1% of cross-market trade between itself and the JSE to 20%-25% in three to five years.
“Our focus is to get all top 40 shares listed,” says Kevin Brady, CEO of A2X. “We have a two to three-year goal on that.”
A2X’s main value proposition in offering brokers an additional platform on which to trade shares, is to enable better pricing in the form of narrower bid offer spreads. It was found in a study conducted by the exchange in August that a 1c narrowing on both the bid and offer prices of the nine top 40 shares with secondary listings on A2X would result in a R125m saving when extrapolated over 12 months.
Should all top 40 shares be listed on the exchange the potential savings in the form of narrow bid offer spreads would climb to more than R1bn a year, while R72m more would be saved on lower exchange fees.
“Our prices are aligned with the JSE but the bid and offer prices are slightly better on A2X while our exchange fees are a little more than half those of the JSE’s,” says Brady. “Those cost savings are passed on in the form of price formation, which manifests as a narrower bid offer spread. That results in material savings for the end consumer.”
Biggest barrier
Absa acquired a small stake in A2X in May, joining other shareholders that include the company’s founders, management, staff and African Rainbow Capital, which holds a 28% stake. Black empowerment firm Nala owns 8% of A2X.
Brady says the biggest barrier to attracting more listings is educating companies about the benefits of a secondary listing and overcoming the incorrect perception that it comes with further costs and additional regulation.
“The main problem we have is that there’s still a huge education process required to break the mindset that you’re just another exchange that comes with additional costs and compliance requirements,” he says.
While A2X has received regulatory approval to host secondary listings of exchange-traded products and a licence extension to include inward listings of foreign companies from approved jurisdictions, it believes domestic legislation is not yet fully aligned with international best practice.
“In the UK for example, if you’re listed and in good standing on the London Stock Exchange, alternate trading platforms can automatically admit these shares for trade on their own platforms as well,” says Brady.
“It’s what they call multilateral trading facilities (MTFs). They have not been introduced in SA yet, but we are hoping the necessary legislation will be enacted in the next two to three years.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.