The JSE, Africa’s largest and most liquid bourse, plans to rein in unnecessary dissemination of information on its news service, saying boilerplate updates on debt securities and exchange traded funds (ETFs) are crowding out material information and inflating compliance bills for issuers.
The stock exchange news service, or Sens, long a conduit for price-sensitive company information in real time, is increasingly clogged with generic publications that are of little use to most market participants.
“It is therefore imperative that unnecessary information that may overwhelm investors and dilute the importance and relevance of other Sens announcements is reduced or removed, where possible,” the JSE said in a consultation paper it issued to industry participants.
“SA financial markets require efficiency, fairness and transparency in order to function effectively. Too much information disseminated through Sens can cloud transparency, and it reduces the ability of market participants to extract the relevant information,” the paper says.
“It is therefore important for the JSE to consider best practices and if certain announcements are necessary for market participants to make informed decisions.”
Too much information disseminated through Sens can cloud transparency, and it reduces the ability of market participants to extract the relevant information.
— JSE consultation paper
To this end, the JSE has proposed scrapping several categories of mandated disclosures under its debt specialist securities rulebook. These would include new listings and tap issuers, routine interest payment notices for Jibar-linked and fixed-rate instruments, and announcements on debt repurchases where the parties involved have the details.
Foreign investors account for as much as 45% of equity turnover on the JSE, which is joining other exchanges in making capital markets simpler and cheaper. Reducing the number of updates is likely to cut audit and assurance costs, especially for smaller issuers, while restoring focus on genuinely market-moving news.
The changes could also go some way in slowing down the exodus of small caps from the exchange and preserving market breadth — a must-have for liquidity and price discovery.
For investor relations-focused firms such as Brunswick, FT Consulting, Edelman and Intinctif Partners, it would remove repeatable tasks that many firms bill for on a retainer or per release basis.
At present debt issuers must publish an announcement on Sens whenever a new security is listed or when an existing security is tapped.
The bourse says this requirement has become burdensome and unnecessary, leading to a large amount of new listing and tap issue announcements, making it cumbersome to find relevant information on an issuer of debt securities.
Such announcements may not add value to market participants because the trades for these listings are conducted in advance, and existing investors are therefore aware of the terms and conditions of the debt security, it added.
“The JSE is proposing that the new listing and tap issue announcements be removed from the DSS Requirements on the basis that this information is already known to the initial investors in these instruments and does not provide the market with any new or additional information,” the JSE’s recommendation says.
DSS, or Debt and Specialist Securities, Requirements is a rulebook containing disclosure obligations for debt instruments.
The JSE has a further item in the rulebook in its sights: the requirement to publish the interest amount payable on a debt security on Sens at least three business days before the relevant interest payment date.
The exchange said that information may not add value to market participants since that is easily determined from the debt securities’ terms and conditions.
The JSE is therefore recommending that interest payment announcements in respect of Jibar-linked and fixed-rate debt securities be specifically excluded as a DSS requirement.
However, it said the interest payment announcements on all other debt securities must still be published on Sens.
The bourse is further proposing that the repurchase of debt securities announcements be removed from the DSS Requirements “on the basis that this information is known by investors involved in the repurchase and the announcement itself may not add value to existing investors”.
The current regime requires that exchange-traded funds (ETFs) publish an announcement on Sens in relation to any change in the issue size, pursuant to a creation or a redemption of ETF units.
The JSE found that these announcements do not add value to market participants because the investor requesting the creation or redemption is already aware of the terms relating to the event.
The bourse is therefore proposing that creation and redemption announcements be removed from the DSS Requirements on the basis that this information is known by the investor involved in the creation, as this would also align with the requirements for actively managed exchange-traded funds (AMETFs), which only require notification to the JSE for creations and redemptions.
“It must be emphasised that the regulatory standards of the JSE remain of paramount importance, but such standards must be at an effective and appropriate level of regulation,” the bourse said.
‘Meaningful benefits’
“The JSE believes that the proposals above could result in meaningful benefits for issuers from a cost, time, and resources perspective without lowering the regulatory standards of the JSE.”
Business Day on Thursday reported that the JSE was consulting capital market participants for proposals on further reducing financial reporting costs, including removal of the disclosure of headline earnings per share (HEPS) as a listing requirement.
Currently, HEPS must be included with the annual financial statements, and issuers incur the additional cost of assurance for the figure.
The JSE has embarked on the biggest shake-up in a generation to rein in the flight of small-cap companies. Africa’s largest bourse has halved in size over the past two decades, which has curtailed trading volumes and slashed investment options.
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