South Africa

A2X’s exceptional growth – with big plans ahead

Kevin Brady

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 CodeNameMarket Cap
AILAfrican Rainbow Cap InvR7 906 649 922
ARIAfrican Rainbow Min LtdR51 567 995 084
AFTAfrimat LimitedR7 569 028 774
ANGAnglogold Ashanti LtdR100 662 653 140
ASCAscendis Health LtdR352 418 370
APNAspen Pharmacare HldgsR65 460 754 581
AVIAVI LtdR23 190 857 350
CTACapital Appreciation LtdR2 187 700 000
CLHCity Lodge Hotels LtdR2 482 128 173
CMLCoronation Fund ManagersR11 956 133 306
DSYDiscovery LtdR83 479 951 546
EOHEOH Holdings LtdR882 724 805
EQUEquites Prop Fund LtdR14 654 852 227
EXXExxaro Resources LtdR67 876 965 477
FTAFairvest Limited AR815 342 554
FTBFairvest Limited BR4 855 964 204
FBRFamous Brands LtdR6 407 936 062
GRTGrowthpoint Prop LtdR46 212 701 779
HDCHudaco Industries LtdR4 877 958 000
HUGHuge Group LtdR666 287 626
SWXTR2IBSWX40TR2ETNOCT2022R1 113 800 000
TOPTR2IBTOP40TR2ETNOCT22R1 308 405 000
IMPImpala Platinum Hlgs LtdR159 739 073 162
INLInvestec LtdR27 656 521 601
INPInvestec plcR62 027 922 090
IVTPInvicta Hldgs Ltd prefR688 425 000
IVTInvicta Holdings LtdR2 911 412 546
MTMMomentum Met Hldgs LtdR22 102 736 255
MTHMotus Holdings LtdR20 259 110 445
MRPMr Price Group LtdR46 804 254 608
NPNNaspers Ltd -N-R1 033 241 274 884
NEDNedbank Group LtdR110 606 930 830
NRPNEPI Rockcastle PlcR55 692 584 245
NTCNetcare LimitedR22 046 858 938
GLDNewGold ETFR15 168 625 321
NGPLDNewGold Palladium ETFR397 085 170
NGPLTNewGold Platinum ETFR5 743 936 000
PANPan African Resource plcR9 002 591 286
PBGPBT Group LimitedR941 500 672
PRXProsus N.V.R2 222 199 432 862
REMRemgro LtdR72 137 570 224
RENRenergen LimitedR4 522 747 447
SACSA Corp Real Estate LtdR5 431 821 325
SLMSanlam LimitedR120 991 519 587
SNTSantam LimitedR27 974 631 703
SOLSasol LimitedR214 205 102 015
SBKStandard Bank Group LtdR267 012 689 474
SBPPStandard Bank Group PrefR5 096 892 258
SUISun International LtdR7 391 997 537
SYG4IRSygnia Itrix 4Ind Rev GbR2 184 197 588
SYGEUSygnia Itrix Eurostoxx 50R2 703 792 133
SYGUKSygnia Itrix FTSE100R1 457 569 970
SYGPSygnia Itrix Gbl Pro ETFR550 120 549
SYGEMFSygnia Itrix MSCI EM 50R2 063 874 458
SYGJPSygnia Itrix MSCI JapanR907 114 715
SYGUSSygnia Itrix MSCI USR6 212 314 998
SYGWDSygnia Itrix MSCI WorldR11 198 295 435
SYGCNSygnia Itrix New China Sectors ETFR190 420 690
SYG500Sygnia Itrix S&P 500 ETFR2 989 533 552
SYGHSygnia Itrix SOL H150R602 217 446
SYGESGSygnia Itrix SP Glob ESGR808 615 345
SYGSW4Sygnia Itrix SWIX40 ETFR167 815 312
SYGT40Sygnia Itrix Top 40 ETFR439 540 422
SYGSygnia LimitedR2 753 699 228
THATharisa plcR6 203 233 232
TBSTiger Brands LtdR29 878 543 006
TCPTransaction Capital LtdR27 878 701 572
4ATWKTWK Investments LimitedR1 974 865 690
VUNVunani LtdR478 633 068
Combined Market CapR5 150 127 553 873