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Johannesburg – South Africa's newest exchange, ZAR X, said it will start operating before the end of February, after an appeal against its licence was dismissed by the Financial Services Board (FSB).
The final judgment, heard on Thursday, dismissed the consolidated appeals by the JSE and 4 Africa Exchange (4AX), with full costs awarded to ZAR X.
The JSE had launched four appeals against the licence since the beginning of 2015, and this was the final hearing. It also appealed against the granting of a licence to 4AX, but the appeal was dropped and both companies agreed to cooperate in financial markets and appeal against ZAR X.
READ: JSE loses urgent bid to halt ZAR X’s exchange licence
Fin24 previously reported on an urgent application submitted by the JSE for the suspension of the FSB’s decision to grant ZAR X its licence. Judge LTC Harms, deputy chair of the FSB appeal board, said there was no evidence that the JSE would suffer harm or prejudice.
The FSB granted ZAR X an exchange licence on August 31 2016, after it found the applicant complied with the relevant requirements of the Financial Markets Act, the FSB said in a statement.
However, ZAR X decided to delay its start date of September 2016, given the pending the outcome of the appeal.
“This week’s judgment gives the market the confidence that the FSB followed a rigorous process in ensuring that ZAR X’s licence application fully complies with the Financial Markets Act and best international regulatory standards,” said Geoff Cook, director at ZAR X.
He also said that the appeals by JSE and 4AX were “vexatious” to prevent the exchange from entering the market to eliminate competition. ZAR X has subsequently approached the Competition Commission which will investigate whether the JSE’s appeals amount to an “abuse of dominance”.
Fin24 has reached out to the JSE and 4AX for comment, but they didn't immediately respond.
Focus on 'ordinary' South Africans
ZAR X intends to focus on investment and savings for “ordinary” South Africans and provide businesses with “a more efficient and cost effective” means to access capital. The aim is to create an inclusive investment market, ZAR X said in a statement.
The exchange will allow South Africans to access the stock market at minimum costs and with limited barriers to entry. It plans to enable zero safe custody fees to allow people in the unbanked sector to grow their investments, and only pay transaction fees.
“There has never been a mechanism by which an individual with a low to average income could increase his investment portfolio via a stock exchange. Not only have the cost barriers to entry been too onerous, but the processes have been incredibly complex and convoluted,” said ZAR X chief executive Etienne Nel.
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Nel added that a vast majority of South African businesses don’t qualify for listing or don’t have the time and money to spend to comply with the exchange rules. This has constrained businesses’ ability to raise capital. Restricted entities such as broad-based black economic empowerment (BBBEE) companies will now be able to list and trade their shares.
ZAR X is set to be the only stock exchange in Africa to offer real-time settlement. This means funds and shares are received immediately after transacting, reducing risk for buyers and sellers.
“Our purpose in establishing ZAR X was to simplify the process of owning and trading in shares so that any South African could own shares,” said Nel.
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