A2X in hot water

Alternative exchange A2X will be fined up to R700,000, with the possibility of more serious consequences, for incorrectly listing major companies like Richemont.

This comes after the Financial Sector Conduct Authority (FSCA) received complaints in 2023 that A2X’s admission process contravened the Financial Markets Act.

A2X was founded by CEO Kevin Brady, Sean Melnick, and Ashley Mendelowitz to create a new South African exchange to compete with the incumbent JSE. 

They aimed to create a more efficient exchange than the JSE with lower fees for investors to trade on. On 6 April 2017, the FSCA awarded A2X a licence to operate an exchange. 

Today, the exchange has over 170 securities and a combined market cap of over R10 trillion. 

These include well-known companies like Pepkor, Absa, Discovery, Investec, Naspers, Nedbank, Prosus, Sasol, Standard Bank, and Vodacom.

However, in April 2023, the FSCA received a complaint that A2X implemented an “opt-out” model as part of its admissions process for companies to list on the exchange.

This model would list the securities of certain issuers on A2X’s exchange platform for trading without subjecting those issuers to the application process outlined in the Financial Markets Act and A2X’s listing requirements.

In a notice posted to its website, the FSCA explained that this admission process was initiated by A2X, with some involvement of the JSE-approved sponsor of an issuer.

“The issuer was then required within a specified period, by A2X, to either accept or decline the inclusion of its securities on A2X’s list of securities,” the regulator explained. 

“Where an issuer failed to respond to A2X’s request to accept or decline to have its securities listed on A2X, A2X proceeded to list the securities of that issuer on the date specified in the ‘opt-out’ letter.”

While A2X has since stopped using this process, the FSCA said this admissions model contravened the Financial Markets Act and A2X’s own listing requirements.

Therefore, the FSCA required A2X to take certain steps to address the non-compliance. 

A2X’s next steps

Specifically, A2X had to tender an Enforceable Undertaking wherein it committed to take immediate steps to engage with the issuers whose securities were listed on A2X under the “opt-out” model.

Some of these issuers include Astral Foods, Barloworld, Blue Label Telecoms, Clicks, Richemont, Dis-Chem, Glencore, Karooooo, Mondi, MultiChoice, RCL Foods, Reunert, Spur, The Foschini Group, and Vodacom.

These issuers need to consent for their securities to remain listed on A2X’s exchange platform.

“In the instances where A2X can provide evidence that it tried to contact an affected issuer and that affected issuer did not respond, the securities of that affected issuer will remain listed on A2X, and A2X would not have contravened this Enforceable Undertaking,” the FSCA explained.

If the issuer refuses, A2X must immediately remove all of those issuer’s affected securities within seven days.

The exchange must also inform all affected parties, including shareholders, and explain why the delisting will take place.

In addition, any associated costs involved in the delisting process must be borne by A2X and not by any of the affected issuers or stakeholders.

“The Authority also informed A2X that it was considering taking regulatory action against A2X, depending on the implementation of such steps,” the FSCA said.

If A2X successfully addresses these steps to the FSCA’s satisfaction within 90 days from a specified date, the regulator will issue an administrative penalty of up to R700,000.

However, if A2X does not comply or fails to do so within the specified timelines, the FSCA said it would retain its discretion to “take other suitable action as it deems appropriate”.

A2X’s Kevin Brady and Gary Clarke signed this Enforceable Undertaking on 24 March 2025.

A2X response

A2X’s response to Daily Investor’s request for comment can be seen in full below.

Due to a complaint regarding the admission to list process that was followed by A2X for seven months from February to October 2023, the FSCA raised, and subsequently investigated, this issue with A2X, and a two-year engagement followed.

To ensure the best outcome for the market and the specific issuers, the FSCA and A2X agreed to an enforceable undertaking in terms of Section 151 of the Financial Sector Regulation Act, 2017 (Act No. 9 of 2017). 

The undertaking requires A2X to address specific issues over 90 days, specifically that the issuers listed via the admission process be notified of the FSCA’s investigation and outcome.

On the successful completion of all steps outlined in the EU, the authority will issue an administrative penalty payable by A2X which penalty amount will not exceed R700,000.

Importantly, there has been no finding or suggestion of any contravention by the issuers concerned.

Trades executed on these issuers are legitimate and have not been impacted by the undertaking. Trading of the shares in these issuers continues while they remain listed on A2X. 

A2X welcomes the closure of this matter, the clarification that the enforceable undertaking brings to the listing application process and the direction provided by FSCA in this regard.

Background

Whilst the Financial Markets Act, 2012 (FMA) allows for competition, it does not, in its current form, adequately enable competition nor cater for the needs of a modern capital market.

It also excludes key aspects such as multiple listings, best execution requirements and post-trade interoperability. 

As a recent stock exchange entrant into the South African financial markets, A2X is constantly looking for new and innovative ways of adding products and growing the markets.

Trade activity on A2X has grown to approximately R20 billion per month. 

The admission process dealt with in the enforceable undertaking (EU)

A2X identified the admission process as a simple way of accelerating the secondary listing of issuers on A2X and growing the market. 

Following extensive discussion and consultation with external legal counsel, A2X embarked on this process from February 2023 to September 2023.  

After identifying a potential issuer as eligible for a secondary listing on A2X and engaging with the company’s corporate sponsor, the issuer was invited to secondary list on A2X. 

The listing of issuers approached was implemented by A2X if the issuer accepted the invitation to list on A2X or if they did not opt out of the listing.

Because the 43 companies were originally approached and listed on an opt-out basis, it was deemed important that they be notified of the EU.  

All the companies identified have been trading, clearing and settling seamlessly and efficiently on A2X for at least 15 months.

All other issuers listed on A2X are not affected by the enforceable undertaking concluded between A2X and the FSCA.