A2X’s exceptional growth – with big plans ahead

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.

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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