South African stock exchange A2X currently has 69 securities listed with a combined market cap of over R5 trillion, with big plans to increase listings and liquidity.
To appreciate A2X’s success, you have to go back to 2014, when Kevin Brady, Sean Melnick, and Ashley Mendelowitz founded the exchange to compete against the Johannesburg Stock Exchange (JSE).
The founders aimed to provide an alternative platform for companies to secondary list and trade their shares efficiently and cost-effectively.
A2X provided end-to-end transaction costs that are 50% lower than current trading costs in South Africa.
The exchange debuted on 6 October 2017, with three listings – African Rainbow Capital, Peregrine Holdings, and Coronation Fund Managers with a combined market cap of R14 billion.
Fast forward five years and A2X has grown to 69 listings with a combined market cap of over R5 trillion.
A2X CEO Kevin Brady told Daily Investor it was initially difficult to get companies to secondary list on a new challenger exchange.
“As A2X has grown and built a track record of being a market of integrity, it has become easier,” he said.
They are now engaging with many companies across various sectors who have indicated an interest in listing on A2X and deriving the benefits of cheaper trading costs and better trade execution prices.
“Asset managers also assist in the new listing process by encouraging companies they invest in to list on A2X,” Brady said.
Trading volumes have also shown strong growth, as highlighted in the chart below.
A2X’s strategy to increase listings
Brady said a key strategy to increase listings is ongoing engagement with companies to educate them about the benefits of listing.
“A listing is often associated with the perception of high costs and onerous regulation,” he said.
“A secondary listing on A2X is free with no additional regulatory obligations or risk. Once companies understand this, in most cases, they list on A2X.”
Brady said accessing key decision-makers at companies has proved difficult. However, this process has become easier as A2X’s profile grew and the benefits of a secondary listing became clear.
A2X has also introduced an inward secondary listing model, which allows companies with a listing on an approved external exchange – like exchanges in London or Australia – to list on A2X where they have a South African connection.
Brady added that they are also exploring the possibility of introducing primary listings of exchange-traded products, which has seen much success in the US and Europe.
A2X’s strategy to increase trading
South Africa has traditionally been a one-market jurisdiction, with brokers’ infrastructure built and engineered for the JSE.
A2X has made huge strides in this area with its key brokers, who account for a large portion of the daily trading volumes.
Brokers have re-engineered their systems to facilitate cross-market trading, allowing for an easier and more streamlined process for trading across A2X and the JSE.
Having addressed the infrastructural hurdles, A2X has focused on improving liquidity by bringing greater depth to the order book on the A2X market.
“Many international liquidity providers have indicated an interest in participating on A2X and, in that way, increasing the liquidity with the consequent increase in trading,” said Brady.
Liquidity providers are very active on international markets, bringing new pools of liquidity to those markets.
“The low trading fees on A2X now make South Africa an attractive option for those liquidity providers, and this will bring greater liquidity to the SA market,” he said.
Matched Principal (MP) trade introduced
Another key initiative that has increased trading on A2X is the introduction of the Matched Principal (MP) trade on 2 June 2022.
It creates a framework for interoperability between South African capital-market exchanges for the first time.
It allows brokers – and, by extension, asset managers and other investors – to reap the benefits of better pricing and increased liquidity.
In essence, the MP trade type enables a broker to move what they’ve traded on one market into the post-trade system of another market.
The broker can issue a single contract note to their client, which records all trades executed on both markets at the average price.
Introducing Matched Principal trade is a significant milestone in South Africa.
In most international environments, exchanges will have access to either a utility clearer or a choice of clearers who will settle trades across all exchanges.
It allows trades to take place across several platforms, with risk managed centrally and a single contract note issued.
South Africa, in comparison, has a unique market structure.
The Financial Markets Act of 2012 allowed for competition in principle but never actively imagined an environment facilitating interoperability and trade across exchanges.
In South Africa, the 50-odd brokers who are members of the JSE are required to use the Broker Dealer Accounting (BDA) platform.
Because A2X used a separate platform, individual contract notes needed to be issued for each exchange, which was time-consuming and inefficient.
The MP trade allows brokers to easily reflect their positions on A2X within BDA and book as they would usually book.
As a result, the broker community can access the best price available, and asset managers can fully avail themselves of these benefits.
In the interests of expanding the benefits of these trades for the sector, neither exchange will levy a fee for MP trades.
It is an industry-agreed solution which makes trading across markets easier for brokers and investors looking to achieve the best execution, get the best deal and source additional liquidity.
A2X’s plans for the rest of the year
Brady said A2X is constantly approached by market participants interested in working with them to bring new products to the SA market.
“We are exploring a number of these opportunities,” he said.
A2X will introduce two new trade types in Q4 of 2022 – the Market at Close Auction and the Auction on demand.
It follows the introduction of two other trade types earlier this year.
“Of these, the Negotiated Benchmark Cross trade type is a new trade type for South Africa. All three of these trade types have been introduced internationally with great success,” said Brady.
Brady added that A2X continues to investigate new and exciting products that grow and enhance what has been a stifled market.
“Enabling regulatory changes to facilitate new products is also key, and A2X continues to engage with the regulator in this regard,” he said.
A2X’s current listings
|Security Code||Name||Market Cap|
|AIL||African Rainbow Cap Inv||R7 906 649 922|
|ARI||African Rainbow Min Ltd||R51 567 995 084|
|AFT||Afrimat Limited||R7 569 028 774|
|ANG||Anglogold Ashanti Ltd||R100 662 653 140|
|ASC||Ascendis Health Ltd||R352 418 370|
|APN||Aspen Pharmacare Hldgs||R65 460 754 581|
|AVI||AVI Ltd||R23 190 857 350|
|CTA||Capital Appreciation Ltd||R2 187 700 000|
|CLH||City Lodge Hotels Ltd||R2 482 128 173|
|CML||Coronation Fund Managers||R11 956 133 306|
|DSY||Discovery Ltd||R83 479 951 546|
|EOH||EOH Holdings Ltd||R882 724 805|
|EQU||Equites Prop Fund Ltd||R14 654 852 227|
|EXX||Exxaro Resources Ltd||R67 876 965 477|
|FTA||Fairvest Limited A||R815 342 554|
|FTB||Fairvest Limited B||R4 855 964 204|
|FBR||Famous Brands Ltd||R6 407 936 062|
|GRT||Growthpoint Prop Ltd||R46 212 701 779|
|HDC||Hudaco Industries Ltd||R4 877 958 000|
|HUG||Huge Group Ltd||R666 287 626|
|SWXTR2||IBSWX40TR2ETNOCT2022||R1 113 800 000|
|TOPTR2||IBTOP40TR2ETNOCT22||R1 308 405 000|
|IMP||Impala Platinum Hlgs Ltd||R159 739 073 162|
|INL||Investec Ltd||R27 656 521 601|
|INP||Investec plc||R62 027 922 090|
|IVTP||Invicta Hldgs Ltd pref||R688 425 000|
|IVT||Invicta Holdings Ltd||R2 911 412 546|
|MTM||Momentum Met Hldgs Ltd||R22 102 736 255|
|MTH||Motus Holdings Ltd||R20 259 110 445|
|MRP||Mr Price Group Ltd||R46 804 254 608|
|NPN||Naspers Ltd -N-||R1 033 241 274 884|
|NED||Nedbank Group Ltd||R110 606 930 830|
|NRP||NEPI Rockcastle Plc||R55 692 584 245|
|NTC||Netcare Limited||R22 046 858 938|
|GLD||NewGold ETF||R15 168 625 321|
|NGPLD||NewGold Palladium ETF||R397 085 170|
|NGPLT||NewGold Platinum ETF||R5 743 936 000|
|PAN||Pan African Resource plc||R9 002 591 286|
|PBG||PBT Group Limited||R941 500 672|
|PRX||Prosus N.V.||R2 222 199 432 862|
|REM||Remgro Ltd||R72 137 570 224|
|REN||Renergen Limited||R4 522 747 447|
|SAC||SA Corp Real Estate Ltd||R5 431 821 325|
|SLM||Sanlam Limited||R120 991 519 587|
|SNT||Santam Limited||R27 974 631 703|
|SOL||Sasol Limited||R214 205 102 015|
|SBK||Standard Bank Group Ltd||R267 012 689 474|
|SBPP||Standard Bank Group Pref||R5 096 892 258|
|SUI||Sun International Ltd||R7 391 997 537|
|SYG4IR||Sygnia Itrix 4Ind Rev Gb||R2 184 197 588|
|SYGEU||Sygnia Itrix Eurostoxx 50||R2 703 792 133|
|SYGUK||Sygnia Itrix FTSE100||R1 457 569 970|
|SYGP||Sygnia Itrix Gbl Pro ETF||R550 120 549|
|SYGEMF||Sygnia Itrix MSCI EM 50||R2 063 874 458|
|SYGJP||Sygnia Itrix MSCI Japan||R907 114 715|
|SYGUS||Sygnia Itrix MSCI US||R6 212 314 998|
|SYGWD||Sygnia Itrix MSCI World||R11 198 295 435|
|SYGCN||Sygnia Itrix New China Sectors ETF||R190 420 690|
|SYG500||Sygnia Itrix S&P 500 ETF||R2 989 533 552|
|SYGH||Sygnia Itrix SOL H150||R602 217 446|
|SYGESG||Sygnia Itrix SP Glob ESG||R808 615 345|
|SYGSW4||Sygnia Itrix SWIX40 ETF||R167 815 312|
|SYGT40||Sygnia Itrix Top 40 ETF||R439 540 422|
|SYG||Sygnia Limited||R2 753 699 228|
|THA||Tharisa plc||R6 203 233 232|
|TBS||Tiger Brands Ltd||R29 878 543 006|
|TCP||Transaction Capital Ltd||R27 878 701 572|
|4ATWK||TWK Investments Limited||R1 974 865 690|
|VUN||Vunani Ltd||R478 633 068|
|—||Combined Market Cap||R5 150 127 553 873|