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JSE apologises for foreign trading data blooper

The bourse has started a full review of checks and balances.

The JSE has apologised for the distribution of inaccurate foreign trading data and has instituted a full review of the checks and balances to ensure that the distribution of erroneous data does not happen again.

Nicky Newton-King, CEO of the JSE, on Monday told Moneyweb that it is important for JSE to “to take accountability fast, to apologise fast and to get the right statistics out there.

This follows a JSE statement, issued late on Sunday, revealing that JSE data relating to foreign trading since May were incorrect. The corrected data stated that foreigners were net sellers of more than R35 billion of South African equities since May.

This is a significant reversal of previous data released earlier that stated that foreigners were the net buyers of nearly R100 billion over the same period. This represents a swing of nearly R130 billion.

Newton-King said that a “glitch” in the programme that calculates the JSE statistics caused the error. “It is not our programme that captures our transactional data, but only the programme that calculates our statistics.” 

Checks and balances

She said once the problem was brought to the JSE’s attention, “our immediate attention was to correct the error and to get the correct statistics out for the affected period. What we are doing now is to make sure all of our processes for the production of our data are reviewed and to make sure that we put in whatever checks and balances might be needed going forward to ensure that we minimise the chance that it may happen again.”

Newton-King appreciates the magnitude of the corrected data, as it represents a R130 billion swing in foreign ownership. “We do have significant checks and balances but for whatever reason they were not sufficient in this particular case. We are now focusing on why [that is]; what additionally needs to be done. Unfortunately, computers are programmed by people and that is why we have to take accountability and why we have to apologise now and fully. We will consider what additional checks and balances need to be put in place going forward.”

She also said, following the publication of the correct stats, the JSE will now investigate why it took so long to realise there was a problem with the data. “I can’t give you a full answer (on why it took eight weeks) until we have completed that investigation, but clearly that is something we have to answer.”

The inaccurate data not only affected the cumulative foreign trading data, but also flowed through to the trading of shares in individual companies. Newton-King confirmed however that the correct data was sent through to data providers such as Bloomberg early on Monday morning.

Influence on investment decisions

Amelia Morgenrood, a portfolio manager at PSG, said in response that the misleading data is extremely disconcerting, as it influenced investment decisions. “I interpreted the inflows as a sign of great optimism towards the South African market, due to foreigners piling into local equities. It did create a false confidence and the new data clearly paints a totally different picture of the reality.”

Newton-King is however doubtful that investors would have based trading decisions on this data as it was distributed to a relatively small audience. “I am not sure that people would have traded on this specific data, as a relatively small sector of people actually get the data, but the index for the period has performed reasonably well relative to other emerging markets. But if people believe they want to talk to us in that regard, they can get hold of us through the normal channels.”

No concerns about other data

It seems as if the foreign ownership data was the only set of data that was corrected. Newton King said the JSE is not concerned about any other data sets. “We produce an enormous amount of data. This is an opportune moment to make sure that there is nothing in any of the other datasets that should cause us concern. We don’t have any concern as we speak now, but we are doing a full review.”

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the JSE has been living on borrowed time for too long … exactly what happens when a monopoly is entrenched by legislation.

– their fees are outrageous for the service they offer

– their functionality is far off world standards (see for eg the trade settlement timing … and ever looked at how “live” the pricing is on the fixed income board … how can listed structured products still be priced at par years after being issued !?)

– and now their systems have been shown up.

the best service offered by the JSE is to their staff and shareholders, two groups who have made a killing at our expense.

In the UK, and I accept SA has a much lower standard, the CEO Newton-King would be asked to resign.

If the fault was corrected within hours or a few days – good – but it took months and I think Ms Newton King should resign – as should her top brass.

I know I am a lone voice, but it would be good to hear important people’s views on this.

you are only a lone voice because as usual SA business prefers to look the other way rather than turn on its family.

the jse has created a low risk / high income corner for themselves in the SA market. look at (i) their lobbying of ASISA to ensure a high % of investments have to be “listed” … ka-ching and (ii) what they offer for this service – large tracts of the fixed income board priced at par. this is VERY IMPORTANT as it effectively inflates fund values … this was self-evident when ABIL crashed with millions of R in credit linked notes still being values at 100% when the shares were crashing to zero.

the JSE were a mile off the pace throughout the ABIL crash and yet no-one gave them a second look then.

why would they do so now ?

If still in legal practice in SA, I would have taken them on in class action – type litigation.

Or straight one on one fight – they must be held accountable for their failures.

If any company is one day late with filings, JSE threatens and then take stern action.

If they are such protectors of the public, they should be held liable.

Anyway – as with all other things in SA – failure is rewarded!!

we need more offices like the public protector, overseeing how activities are carried out across more sectors than just government. maybe Ms Madonsela can be convinced.

one of the if not the most expensive exchanges in the world, this is utterly pathetic.

End of comments.

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