A2X, the alternative exchange currently licensed to allow secondary listings, says it is saving the investment market about R500m a year, thanks to lower trading fees and its ability to narrow the bid-offer spreads of the prices of listed securities.
By allowing transacting brokers to arrive at a more efficient pricing level when buying and selling shares, A2X says it plans to boost the potential savings for the market to R1.5bn as more public companies opt for a secondary listing on its platform.
A2X has successfully grown its trade value 40-fold from 2017 when it did just R657m in its first year, to more than R26bn in its fifth year of operation. The alternative exchange says its fees on the end-to-end cost of a trade are about 50% lower than those of the JSE, while it attracts additional liquidity in terms of the volume of shares traded.
“The combined cost savings we deliver to the investment industry is a clear sign that significant opportunities remain to lower the cost in key parts of the investment value chain,” A2X CEO Kevin Brady said.
“These benefits are then delivered to the ordinary person who is seeking to incrementally build their wealth by way of an investment or pension fund product. As a significant player in the capital markets, we remain mindful that for most people in SA, the only wealth they are likely to accumulate over their lifetimes is in their pension fund. Therefore, as responsible industry players, we must constantly look at how we lower costs to benefit the end client. Small, incremental cost savings over, say, a 30-year period can add a significant boost to people’s pension funds.”
A2X’s efforts to grow cost savings gained momentum in 2022 when the capital markets regulator, the Financial Services Conduct Authority (FSCA), and industry players reached a landmark agreement in April to enable brokers to move their trading positions from one exchange to another as they issued a single contract note. This solution involved the introduction of a new trade type, called the matched principal, which partly enables investors to capture the additional liquidity and price improvement benefits offered on A2X as they execute their trades.
While the matched principal trade “is a step in the right direction, there are still many other infrastructural and regulatory hurdles to overcome”, Brady said. “We are, however, pleased that the FSCA is approaching these matters from the perspective of what is best for the industry. The FSCA has laid the foundation for future advancements.”
A2X grew its number of listed securities by 55% in 2022 to 88, with its latest coup being to lure retailer Pick n Pay to its platform on November 1.
That brought the combined market capitalisation of all the securities listed on A2X to almost R4.8-trillion, making it the second-largest exchange in Africa by market value.
A2X also has 17 of the JSE’s top 40 companies, with Remgro, Nedbank, AngloGold Ashanti, Impala Platinum and Discovery moving to it for secondary listings in 2022.
Local exchange traded fund issuers, including 1nvest, Absa and Sygnia, have opted to secondary list 34 of their index trackers on A2X.
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