The future of A2X

Stock exchange A2X has grown rapidly over the past few years, which CEO Kevin Brady believes can be sustained through the right regulatory changes and offering unique products and services.

A2X was founded by Brady, Sean Melnick, and Ashley Mendelowitz to create a new South African exchange to compete with the incumbent Johannesburg Stock Exchange (JSE). 

It aimed to create an exchange that was more efficient than the JSE with lower fees for investors to trade. 

A2X was awarded a licence to operate an exchange by the Financial Sector Conduct Authority on 6 April 2017. 

On 6 October 2017, A2X debuted with three listings – African Rainbow Capital, Peregrine Holdings and Coronation Fund Managers – with a combined market cap of R14 billion.

In just the past year, A2X has added over 80 securities and now has 183 listed securities with a combined market cap of R8.5 trillion.

The platform has grown its trade value from R657 million in 2017 to just over R75 billion in 2023. 

Its trade count has also increased to over 1.2 million trades in the last year, up from 213,000 in 2021/2022. 

A2X now has 31 of the JSE Top 40 constituents, including Vodacom, Woolworths, Remgro, Nedbank, AngloGold Ashanti, Impala Platinum and Discovery.

“The highlight of the last year has been the unlock that has come on the back of five years of hard work,” Brady told Daily Investor. 

“The company has been growing, but the acceleration of the last 12 months has been wonderful.” 

Brady said this is due, in part, to a critical mass being reached in the company’s brand and the number of companies listed, as well as a tweaked approach to include a sponsor. 

“On the trading side, the market share and the growth have been strong, even when things have been tough. This is because there is a clear benefit to saving money and accessing additional liquidity in these times,” he explained.

A2X has 11 brokers connected and operational on A2X, with the only “big ones” missing being international players.

However, Brady said three of the four big internationals have already “pulled the trigger” to become members. “So, there is definitely an ongoing runway for continued high growth rates,” he said. 

He said the company’s ultimate target is to have 20% to 30% of the market in 3 to 5 years’ time. 

A2X would also like to have all 40 of the JSE Top 40 companies listed on the exchange.

However, this is made more difficult since many of these companies are not domiciled in South Africa, and the country is only a small portion of their operations.

“Unfortunately, in the South African regulatory environment, you need their permission, which makes a handful of them particularly hard,” he explained.

“There are a couple that are particularly hard, but I’m pleased to say that we are working on all of them, and we will continue to grow that.”

He said there are also some regulatory changes in the pipeline, which should make this process less difficult.

One of these changes includes introducing a Multilateral Trading Facility-model, allowing the A2X to list these companies unilaterally.

When asked if A2X would ever consider primary listings on the exchange, he said that, at the moment, A2X is leveraging its secondary model.

This model allows them to list and trade a wider range of products, including warrants, depository receipts, actively managed certificates, and asset-backed securities. 

This is part of their strategy to broaden their range of products and attract more issuers and brokers.

He explained that while there is some interest in A2X moving into the primary market, they believe it is important for regulation to allow for the transfer of listings to be competitive. 

They would need to see a significant opportunity or a change in regulation before jumping into the primary market. 

However, he said it could be a consideration further down the road. “Like all exchanges, we think we should be there in the long run,” he said.