A2X CEO Kevin Brady said the stock exchange is close to being profitable and will likely reach profitability before the end of 2024.
A2X was founded by Brady, Sean Melnick, 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.
Today, the exchange has 183 listed securities with a combined market cap of R8.5 trillion.
The company has grown its trade value from R657 million in 2017 to just over R75 billion in 2023.
Despite this rapid growth, Brady said certain challenges come with any infrastructure business, particularly in South Africa, where the exchange has to compete with the incumbent JSE.
“You can’t go and get a second-rate matching engine – it’s got to be at least as good as the incumbent,” he explained.
“So there is a big cost that comes to that. And so it’s a beautiful business in the sense that it takes time to get to that break-even. But once you’re through that break even, it’s very nice because you have incredible leverage; you can throw a lot of volume through it.”
Brady said that once this infrastructure is built, “you can add anything that looks like an equity and the more products you have, the better”.
“It’s taken longer to reach this point than we would have liked. There have been several headwinds, of which I would say Covid-19 was the worst. That probably delayed our breaking point by 18 months to two years.”
He said South Africa’s outdated regulatory environment is another headwind the company has had to navigate.
For example, he said there was a draft released in 2016 for the road map around updating the Financial Market Act, but aside from another draft in 2020, nothing further has come of it.
“That very, very slow-paced roll-out of regulation that would create a competitive environment has been our biggest challenge,” he said.
Another regulatory challenge is that A2X currently needs a company’s permission to have a secondary listing on the exchange.
This makes it difficult for A2X to list the entire JSE Top 40, for example. This is because many companies on the JSE are not domiciled in South Africa, and the country forms a small part of its operations.