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JSE’s appeal against ZAR X’s licence dismissed with costs

New exchange given the green light to operate.

The Financial Services Board (FSB) Appeal Board has dismissed the consolidated appeals of the JSE and 4AX against the regulator’s granting of a license to new exchange ZAR X. The judgement, handed down on Thursday, also awards full costs to ZAR X.

“The judgement vindicates our belief that the JSE and 4AX appeals have been vexatious, aimed at preventing us from entering the market and, ultimately, eliminating us as a competitor,” said ZAR X director, Geoff Cook. “At our request, the Competition Commission has launched an investigation into whether the JSE’s appeals amount to an abuse of dominance, which is prohibited under Section 8 of the Competition Act.”

Cook added that the decision removes any doubt around ZAR X’s ability to fulfil its obligations as an exchange.

“This week’s judgement gives the market the confidence that the FSB followed a rigorous process in ensuring that ZAR X’s license application fully complies with the Financial Markets Act and best international regulatory standards,” said Cook.

ZAR X initially planned to begin operating in September last year, but postponed that start date pending the outcome of the appeals process. The exchange said that its first listing – agri-business Senwes – will now take place before the end of February, and more issuers will be announced shortly.


In handing down judgement, the Appeal Board’s chair, Judge LTC Harms, had some strong words for the JSE and 4AX. He noted that while the appeal focused on the registrar’s alleged failure to comply with the Financial Markets Act (FMA), the appellants hardly considered the detailed reasoning the registrar had offered.

“What is striking is that the appellants did not engage with the Registrar’s reasons of some 120 pages for granting the licence and there was hardly any reference to content of the thousands of pages forming the record of decision,” Harms noted.

“For instance, the Registrar spent pages on explaining why the grant of the licence will further the objects of FM Act but the argument disregarded the reasons or their context.”

He also dismissed the JSE’s argument that it should have been entitled to see ZAR X’s full licence application to be able to respond to it properly. This is the primary argument raised by the JSE to Moneyweb as to why it had persisted with its appeal.

However, not only did Harms find that there was no legal requirement for this to happen, but that in fact the JSE had been given access to the full application and it had found nothing wrong with it.

“The irony of the submission is that the JSE, subject to a confidentiality agreement entered into between the parties for purposes of the appeal, had sight of the full application for purposes of the appeal,” he noted. “Not one of its eventual grounds is based on anything contained in the undisclosed part of the application. In other words, any alleged failure did not affect the JSE.”

JSE reaction

The JSE’s director of capital markets, Donna Nemer, said that while the JSE is disappointed by the judgement, it will fully respect and abide by it.

“We are still very committed to the market and the participants in this market, and will cooperate fully in the debate on how we should be evolving going forward,” she said. “We will continue the work we are doing with the regulator and all the market participants, including the new exchanges, to maintain the high quality capital markets for which South Africa is really well known.” 

She added that they still believed some of the issues that they had argued around market surveillance, for instance, were important and they would continue to raise them in other forums.

Way forward

Kevin Brady, the CEO of a another aspiring exchange, A2X, told Moneyweb that the ruling is a very good one for the future of the industry.

“I think it’s a good ruling, and positive for applicants like ourselves as it paves the way for us to move to the next step,” Brady said. “It also exposes the JSE’s real intentions in terms of trying to delay.”

A2X’s application for a license is currently with the FSB, and Brady hopes that it will be put forward for consideration by the licensing committee within the next two to three months.

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Disruptors – welcome – good ruling by the FSB.
The JSE behaves like a bully – it contradicts its very own philosophy – Open markets and healthy competition. Wish these new entrants all the best in its endeavors.

End of comments.





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