comp 2 2.0

History of the JSE origins

The JSE began with the Kimberley Stock Exchange (1881) and Johannesburg Stock Exchange (1888) following diamond and gold discoveries.

Trading between the chains

In 1889 shares were traded in a cordoned-off street area due to limited space

Early JSE relocations

The JSE moved to Hollard Street (1903)

Electronic trading introduction

In 1996 the JSE moved from open-outcry auction trading to a modern electronic trading system.

Development Capital Market (DCM)

Launched in 1984 for smaller companies requiring high-risk capital.

Venture Capital Market (VCM)

Introduced in 1989 for high-risk start-up companies needing finance.

AltX

Alternative Exchange created in 2003 for small/medium high-growth companies with lighter listing requirements.

Demutualisation of the JSE

On 1 July 2005 the JSE became a public company (JSE Ltd) with shareholders instead of member-owners.

Control over SAFEX

In 2001 the JSE obtained control over SAFEX

Control over BESA

In 2009 the JSE gained control over the Bond Exchange of South Africa

Settlement cycle T+3

In 2016 the JSE changed settlement from T+5 to T+3 to align with global standards.

Introduction of competing exchanges

FSCA licensed ZARX

Primary market function

The JSE converts savings into risk capital by issuing new shares and instruments.

Secondary market function

The JSE provides an orderly platform for trading existing shares based on supply and demand.

Requirements for active market

Free information

External control of the JSE

Governed by the Financial Markets Act

Internal control of the JSE

Managed by a board of directors (≥6)

Corporate governance standards

The JSE follows King IV principles: independence

Listing process

Companies apply through a sponsor

Main Board listing requirements

≥R50m capital

AltX listing requirements

≥R2m capital

Mandatory company governance for listing

Freely transferable shares

SENS announcements

Interim and final financial results must be published on the Stock Exchange News Service.

Advantages of listing for companies

Provides prestige

Advantages of listing for shareholders

Listed shares are liquid

Membership before 1996

Membership was limited to natural persons (stockbrokers).

Membership after 1996

Membership allowed to institutions/companies instead of individuals.

Membership categories – TSP

Trading Service Provider executes trades for clients or own account.

Membership categories – CSP

Custody Service Provider performs custody services for clients' securities.

Membership categories – ISP

Investment Service Provider may offer investment services if also a TSP.

Membership prerequisites – general

Must be a registered domestic company

Equity member requirement

Must appoint a Central Securities Depository Participant (CSDP) unless acting only as CSP.

Debt and derivatives member requirement

Must appoint money-laundering officer

Capital requirements for members

Must hold liquid capital covering 13 weeks of expenses or R400 000

Trading capacity – agent

Member buys/sells on behalf of client for brokerage (commission).

Trading capacity – principal

Member trades using own shares/funds to client; no brokerage allowed.

Stockbroker role

Acts as a link between investors and the JSE to buy/sell shares.

Stockbroker qualifications

Requires finance degree

Controlled broker client

Broker controls client’s funds/shares; uses JSE trust fund and own CSDP.

Non-controlled broker client

Client appoints own CSDP and holds own funds; must inform broker of CSDP.