The consortium of multinational companies behind 4AX, led by Bravura, is in the process of applying for a licence to become an exchange for trading in shares of companies that are currently trading over-the-counter (OTC) shares in BBBEE schemes, as well as limited participation share entities.
The stakeholders in the consortium include Trifecta Capital™, Intercontinental Trust, Capital Markets Brokers, NWK, and Global Environmental Markets (GEM).
GEM is a developer of electronic exchange trading platforms, whose owner has been involved in developing more than 30 exchanges in 22 countries.
The JSE, however, agreed that there was a need for a BEE share scheme.
"The JSE believes that the provision of an appropriately regulated primary and secondary market for BEE share schemes is critical. Issuers have gone to a great deal of trouble and expense to implement truly broad-based BEE schemes," said Zeona Jacobs, Director of Corporate Affairs and Marketing at the JSE.
Jacobs went on to say that the JSE is looking at its own BEE Board to see how this could be adjusted to cater more specifically for the needs of issuers and investors.
"But given the importance of this issue, the more people that are looking at innovative solutions, the greater the likelihood that we will come up with something that works for the market as a whole," said Jacobs.
The application to register 4AX comes after the Financial Services Board (FSB) issued a directive last year July, which stated that companies must either licence their OTC platforms as a regulated exchange, or obtain the appropriate exemption to continue with such activities.
"These proposed regulations will ensure that South Africa can meet its G20 obligations in terms of the regulation of the OTC derivatives market," said National Treasury in a statement last year.
Treasury went on to say that OTC's were the key contributor to the global financial crisis, and as part of the G20 many countries across the world, including South Africa, have been working towards better standards.
"These reforms are necessary to improve transparency in the global derivatives markets, mitigate systemic risk, and protect against market abuse. As a member of the G20, South Africa is committed to G20 agreements for OTC derivatives market reforms," said Treasury.
Ease of investing
"This caught many companies off guard and most of those companies applied for exemption from the requirements. In most instances, exemptions were granted for a limited period to provide companies [with time] to consider alternatives," said Stephan van der Walt, spokesperson for 4AX.
Van der Walt went on to say that by obtaining a licence, 4AX will provide issuers and shareholders with the following benefits:
- Ease of investment and trading,
- Increased liquidity,
- More market exposure,
- A lower cost alternative to the JSE,
- As well as enable asset managers who may only invest in listed shares to also enter this market.