Carry on as usual

Over the counter trading continues, if the business model is changed and the operator is a licenced FSP.

Norman Muller, head of capital markets at the FSB provides clarity about over the counter (OTC) trading, following an announcement several weeks ago by BMJ that they would discontinue OTC trading on a particular platform.

Muller says that the FSB has not stopped OTC trading. The Securities Services Act, 2004, that was promulgated in February 2005, contains a definition of an exchange.

An exchange is defined as "a person who constitutes, maintains and provides an infrastructure for bringing together buyers and sellers of securities; for matching the orders for securities of multiple buyers and sellers; and whereby a matched order for securities constitutes a transaction.

If any operation falls within this definition, it must be licensed as an exchange or change its business model not to fall within the definition.

Muller says people can still buy and sell unlisted securities without operating an exchange. However, they need to comply with the provisions of the Financial Advisory and Intermediary Services Act.

The FSB's Gerry Anderson says that if an entity wants to trade in unlisted shares it can do so provided it has a FAIS licence, in other words is an authorised FSP.

The previous securities legislation, namely the Stock Exchanges Control Act, 1985, did not contain a specific definition of an "exchange".