New kid on the block targets JSE

The brains behind a new South African stock exchange, 4 AFRICA Exchange (4AX), say it could cripple the AltX - the JSE's board for small and medium-sized high-growth companies - should the Financial Services Board give it the green light.

It will cost less for companies to list on 4AX than the JSE, but the board has yet to award it a licence. The new exchange aims to become a stock exchange mainly for companies that trade their shares over-the-counter.

The consortium launching the new exchange includes financial services company Bravura, Global Environmental Markets (GEM), Trifecta Capital, Intercontinental Trust, Capital Markets Brokers and NWK.

Founders of 4AX believe that companies now listed on the JSE's AltX will choose to switch platforms.

"Watch this space," said Bravura CEO Adie du Plessis.

Wayne Sharpe, chairman of GEM, said 4AX might provide a better solution than "that J-thing over there" - a reference to the JSE.

Nicky Newton-King, the CEO of the JSE, said her exchange was investigating if it could offer similar platforms for "restricted shares".

"We will see who provides the best, [most] attractive service" for issuers, Newton-King said.

Newton-King said she believed 4AX would compete more directly with the JSE's black-empowerment board, which the bourse was trying to configure to serve the needs of BEE companies. "If they [4AX] want to compete with the AltX, we will be very happy to compete," she said.

But experts doubted that a new exchange could challenge the JSE.

Wayne McCurrie, head of portfolio management at Momentum, said that for the new exchange to be successful, it would have to attract new listings and ample trade.

"I hope they are successful, but it is a tough task they are setting themselves [up] for," McCurrie said.

McCurrie said that even if 4AX managed to lure all the companies listed on the AltX, this wouldnot dent the JSE's business. He said that for 4AX to be really viable, it would have to capture at least 20% or 30% of the R16-billion in the JSE's daily trading volumes.

Bravura said the market capitalisation of all the companies that could list on 4AX could exceed R30-billion, and cater to 650000 shareholders.

But McCurrie said this was probably not even equal to 5% of the JSE's volume.

However, the announcement of a rival to the JSE comes at a time when the local exchange has been battling to attract new quality listings.

4AX's idea to launch a new exchange followed the board's announcement last July that over-the-counter share trading platforms had to either license themselves as regulated exchanges, obtain an exemption to continue trading or shut down.

The board's decision was seen as a blow to the trading in empowerment shares of several companies, including MTN and Sasol, which had formed their own trading platforms.

Bravura's corporate affairs head, Stephan van der Walt, said 4AXwould also address the issues facing restricted shares - the restrictions on share trading embedded into the founding documents of some companies.

For example, BEE schemes may only allow a black individual or BEE-certified corporate to buy and hold their shares. Equally, some agriculture companies only allow qualified farmers to buy and hold its shares.

Companies such as Assupol, TWK Agriculture Holdings, Naspers Welkom/Yizani, MTN Phuthuma Nathi and Sasol Inzalo are some of those that might benefit from the new exchange.

Van der Walt has started discussions to woo some of the companies to the new platform, but has yet to reveal who has committed.