Stock exchange for lower income earners gets approved

The Financial Services Board (FSB) has granted ZAR X the first stock exchange operating license in over 100 years, paving the way for SA’s first competitor to the Johannesburg Stock Exchange (JSE)

ZAR X CEO Etienne Nel says it’s a significant move because the new platform – which will launch in Septemeber – will make investing in the stock exchange more accessible and affordable to ordinary South Africans, particularly in the low- to mid-level income brackets.

“ZAR X has no historical practices and legacy systems which drive up costs and slow down transaction times. Our platform is specifically designed to give businesses a flexible, transparent and affordable way to list their shares,” Nel said in a statement.

“In particular, the exchange is especially well positioned to facilitate listings of restricted share schemes – currently trading over-the-counter (OTC) – which the FSB ruled were in contravention of the Financial Markets Act. A more flexible and practical listings process will ensure greater simplicity and less complexity for companies making use of the ZAR X Stock Exchange.”

The ZAR X Stock Exchange will feature three boards: a main board for company listings, a restricted market, which will be the exchange’s main focus and targeting former OTC traders following the FSB’s clampdown on OTC trading platforms, and an investment products market for the trade of structured products and preference shares.

READ MORE: New stock exchange for SMEs in the pipeline

“The FSB license ushers in a new era in which the barriers to full economic participation by previously excluded sectors of the population are significantly reduced,” said Nel.

“The emergence of the ZAR X Stock Exchange is a signal that the rigid structures of the past are being dismantled, helping to clear the way for new entrants to the formal economy, especially black investors and entrepreneurs who are eager to make a bigger contribution to job creation and wealth generation.”

Speaking to Moneyweb, Nel said that compliance costs have been significantly reduced to make listing on the new stock exchange around 80% cheaper than listing on the JSE.

“[If] you are starting out and all you have is R10 000 to invest on the JSE, you would need a broker who charges you a custody fee of R85 per month. With us you can save whatever you have without having to incur fees to execute the trades,” he was quoted saying.

The approval of ZAR X’s operating license comes as another alternative stock exchange called the SA Financial Exchange (Safe) is waiting to hear whether its application for a stock exchange license will also be approved.

Safe’s aim is intended to help small up-and-coming businesses raise capital to grow and is designed to create up to 500 000 jobs in the long term.

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Safe is the brainchild of local accountant Francois Venter – a former Bond Exchange of SA executive and Seychelles Financial Exchange founder. He plans to get at least 1 000 companies listed on this alternative stock exchange over the next 10 years.

Companies that list on Safe must have a turnover of between R15 million and R800 million.

JSE CEO Nicky Newton-King has reiterated the JSE’s self-assurance in its ability to compete.

“We are confident in our ability to compete in any segment of our market based on the products, services, technology and pricing that we offer our clients,” she said on Wednesday.