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JSE reacts to competitor exchange judgment

Johannesburg – The Johannesburg Stock Exchange (JSE) is open to competition but will continue to protect the high regulatory standards achieved by financial markets, according to Donna Nemer, director of capital markets for the JSE.

Nemer spoke to Fin24 following a decision by the Financial Services Board (FSB) to dismiss an application against the licence granted to exchange newcomer, ZAR X.

The JSE had contested the licence granted to ZAR X as far back as 2015, and had launched four appeals, the final one in conjunction with 4 Africa Exchange (4AX). The judgment was heard on Thursday.

ZAR X will start listing before the end of the month.

READ: Failed JSE appeal paves way for ZAR X launch

“We are disappointed by the judgment, but we are going to respect and abide by that,” said Nemer.

She explained that although the JSE accepts that the world is moving towards a trend of multiple exchanges, South Africa particularly enjoys a “high level” of global recognition for its excellency.

“When you look at the World Economic Forum (WEF) ratings on countries, for the past eight years in terms of regulatory standards, we have ranked number one, two or three for regulatory standards in our securities market,” she said.

“In the last year we were number one in the world for the ability to raise capital on the local equity market.”

Given this, Nemer acknowledged the importance of having competitors, but said introducing new entrants should be done in a way “that enhances the quality” of the market and not “risk the great things” achieved.

“We want our markets to be inclusive to small and medium size companies and reach investors which have not had access to it in the past. But instead of lowering the standard, they should be given a market that sets a high global standard.”

She emphasised that companies and investors should have access to “great quality” markets.

As a license holder, the JSE will continue to express its views in terms of what it feels is best for the market, she added. The JSE will continue to work within market structures, along with regulators and other exchanges, such as 4AX, to create a framework constructive to competition and which still maintains a high standard.

ALSO READ: Trader promises price war to undercut JSE

Being in an industry with a high level of regulation and which licenses are granted to participants, Nemer said it was likely that current license holders would want to challenge the terms in which new licenses are granted.

“Those who have the licence, want to make sure that those getting the licences are getting them  basically on the same terms,” she said.

ZAR X approached the Competition Commission to investigate the JSE on grounds of abuse of dominance. Nemer said the JSE was aware of this and would cooperate fully with the steps required in the investigation.

The FSB granted ZAR X an exchange licence on August 31 2016, after it found the exchange complied with the relevant requirements of the Financial Markets Act. However ZAR X delayed its start date from September 2016 given the pending outcomes of the appeal.

In a statement issued by ZAR X, the exchange said that that appeals launched against its licence was “vexatious” and an attempt to eliminate competition.

“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.

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