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The path is clear for a new stock exchange

4 Africa Exchange plans to start operating in March.

After battling the mighty JSE over the Financial Services Board (FSB) licence that paves the way for the launch of a new stock exchange, the 4 Africa Exchange (4AX) is readying itself to go live.

4AX announced on Thursday that all appeals against its exchange licence – awarded by the FSB in August last year – have been formally withdrawn.  “…We are very pleased that all appeals against our exchange licence have now been withdrawn. This move demonstrates recognition by the market for our processes, procedures and the structure of our proposed market offerings,” says 4AX’s CEO Fay Mukaddam in a statement.

This means that 4AX can forge ahead with its preparations to begin trading, which is earmarked for March 2017.  Moneyweb’s request for an interview with Mukaddam for further details was denied.

The introduction of a new exchange is viewed by market watchers as a positive step for more competition in the local market, where the JSE has historically enjoyed a monopoly.

The JSE launched an appeal against the FSB’s decision to grant 4AX a licence, delaying its ambitions of being an alternative exchange in SA’s capital markets. The JSE’s concerns were based on maintaining the integrity of the market when there are several stock exchanges operating with their different forms of technology and settlement cycles – and to protect investors. It subsequently withdrew its appeal in December saying that the two parties reached an agreement.

4AX’s value proposition is based on providing a licenced exchange that is more affordable than the JSE and red-tape free. The target for 4AX would be medium-sized companies and retail investors. 


The JSE has also battled another potential exchange, as it launched an urgent application to have ZAR X’s exchange licence suspended. The FSB’s appeal board deputy chairman Judge Louis Harms later dismissed the JSE’s application on the basis that it didn’t submit evidence that it would suffer harm or prejudice from ZAR X’s entry in to the market.

However, the application for its licence to be suspended will still be heard by the board later in January. Both 4AX and the JSE are appealing against the FSB’s decision to grant ZAR X a licence. The FSB granted ZAR X its licence to operate as a stock exchange in August last year. 

ZAR X’s CEO Etienne Nel says it has been business as usual for the company despite having the trading of its exchange put on ice. “We still have our FSB licence and our systems are fully operational and functional. We have used this quiet period to add functionality to our settlements and clearing process [of the exchange].” 

ZAR X is looking to list companies with a minimum market capitalisation of R200 million. In addition to signing up agricultural services group Senwes Beleggings as a customer, Nel says it has added two additional companies to its listing pipeline. “This speaks to the confidence that the market has in our offering. Companies have complete faith in our platform and technology,” he adds.

Arguably, the JSE’s process for appeals against new players has created the perception that it’s against competition.

There have been three applications for licenced exchanges in 2016 including AX2, YPN Exchange and the Equity Express Stock Exchange in terms of the Financial Markets Act. The head of the Department of Market Abuse at the FSB Solly Keetse says: “These exchanges are not yet licenced but their applications are still being assessed.”

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Brilliant for competition!

The JSE has done an excellent job becoming one of the most secure and efficient exchanges in the world but they have missed a large opportunity to support markets across Africa – with our industrial strength SA should have been the gateway to Africa. Understandably this is complex task, a large portion of which is out of their control ..but the point I’m making is that competition should spur some proactivity to start expansion.

Who knows if this new player will be any good ..but I wish them all the best!

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