Companies and investors ‘welcome ZAR X stock exchange plan’

Etienne Nel, CEO of ZAR X.

Plans for the ZAR X stock exchange – scheduled for September launch – have been welcomed by both business and the investment community, say the innovators behind the concept for a flexible, simple and affordable method of listing a company and trading shares.

ZAR X (Pty) Ltd – a Johannesburg company formed to create a new stock exchange alongside the well-established JSE – has received conditional approval from the Financial Service Board (FSB) to set up a new market that greatly simplifies access to share ownership, especially for lower-income groups that were previously excluded from full participation in the South African economy.

Says ZAR X chief executive officer Etienne Nel: “The FSB has granted ZAR X conditional approval for a stock exchange licence in terms of Section 9 of the Financial Markets Act. The conditional approval is granted subject to the fulfilment of certain suspensive conditions being met to the satisfaction of The Registrar of Securities Services.”

A key factor driving the ZAR X launch is the need to promote and enhance a black equity stake in the economy.

One of the state-of-the-art platforms has been specifically created by ZAR X to enhance trade between the holders of so-called restricted BBBEE shares who are looking to realise value after participation in empowerment structures.

The listing of restricted shares in this environment means transformed companies can retain or enhance their empowerment profile in perpetuity, says Nel.

This was one of several positive features to be favourably received.

Says Nel: “Since the announcement of conditional FSB approval, we have received numerous messages of support from companies – including major corporates – and members of the public.

“There is huge demand for a stock exchange that deploys fast, reliable technology to cut costs and red tape. The fact that our model also permits share trading by mobile and hand-held devices has also been widely applauded.

“ZAR X trading is by no means free, but fees are greatly reduced. In the listings environment, we achieve significant savings and cost efficiencies by initiating a move from a rules-based to a principles-based dispensation. Yet we still achieve rigorous alignment with world best practice, as set out by the International Organization of Securities Commissions and the World Federation of Exchanges.”

Other ZAR X features welcomed by potential ZAR X users are free safe custody facilities for investors and T+0 or same-day settlement of trades.

Previously, buyers and sellers in South Africa’s equity market faced a five-day time-lag between matched trade and settlement and clearing into an investor’s account.

Nel notes: “Our settlement period is world leading and significantly reduces settlement risk as all transactions are pre-funded.”

ZAR X focuses on equities only and in particular so-called restricted securities, as well as investment products, like preference shares and structured products from highly regarded issuers, such as major banks.

ZAR X will not engage in short-selling or trading in the futures or derivatives market.

Three platforms are available to issuers:

• A main board for company listings, with much-reduced red tape and compliance documentation.

• A ‘restricted market’ for trading BBBEE shares and other securities that can only be bought and sold within a narrowly defined investor base.

• An investment products market for trading structured products and preference shares.