JSE rival A2X hunts more big-fish stock listings in SA to join likes of Sanlam

JOHANNESBURG — New local stock exchange A2X has big promises to disrupt the local equities market by using the latest technologies and dramatically cutting fees. But the exchange has had somewhat of a slow start to date, with volumes at low levels (despite South Africa’s biggest insurer Sanlam coming on board). However, A2X is hoping to ramp things up in years to come and grow its market share to the upper single-digit percentage figures in years to come. Even it’s a slow start, competition is still a good thing as the gorilla in the stock market, the JSE, has been forced to become more competitive and lower its fees. – Gareth van Zyl

By Thembisile Dzonzi and Antony Sguazzin

(Bloomberg) — Since it started operating in October, the biggest breakthrough for South Africa’s A2X Markets for secondary listings came on a Monday in April.

That was when shares in Sanlam Ltd., the largest South African-based insurer, began trading on the fledgling bourse, adding to the 166 billion rand ($13 billion) company’s primary listing on the Johannesburg Stock Exchange run by JSE Ltd. A2X Chief Executive Officer Kevin Brady is hoping more big fish will follow.

“We aim to list as many companies as possible with a mix of Top 40, Top 100 and other companies,” Brady, a former head of equity trading at Investec Ltd., said in an emailed response to questions. “We would like to get high single-digit market share within two to three years.”

A2X Chief Executive Officer Kevin Brady

A2X is aiming to eat some of the JSE’s lunch by attracting brokerages with transacting costs about 50 percent lower than its giant rival, while secondary listings come at no expense to companies that join the bourse. The exchange is also seeking a technological edge, using the same trading and surveillance technology as London’s independent Aquis Exchange.

That’s led to eight listings so far, with Sanlam’s April 16 debut followed this week by Ascendis Health Ltd., the first health company to join the bourse. While that brings the combined market value of its companies to about 220 billion rand, A2X has more to do to win over company boards, who must approve the listings, and investors.

The startup exchange needs to “get the big names, and international names and all of the brokers,” said Bradley Preston, a money manager at Cape Town-based Mergence Investment Managers. A winning outcome is one that “solves the operational issues” and allows investors to “seamlessly trade on both exchanges,” he said.

The benefits of increased competition for the Johannesburg Stock Exchange are already starting to show, with JSE Ltd. reducing some of its fees since A2X’s arrival, Brady said.

Still, it’s a formidable task to convince companies and traders to look beyond a bourse that ranks among the 20 largest in the world. Volume in Sanlam stock on the JSE reached 8.5 million shares Wednesday, while 1,000 shares in the insurer changed hands on A2X on May 28, the last time the stock was traded there, according to data compiled by Bloomberg.

“It will be quite a while before you see lots of the major players moving to another exchange — that’s still a couple of years away,” said Michael Treherne, a money manager at Vestact Ltd. in Johannesburg.