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Challenges for our Markets: JSE's Future Developments and Africa Strategy

Nicky Newton-King, Deputy CEO of JSE Ltd, discusses the current state of the JSE and global developments affecting exchanges. She also outlines future developments, including listings, trading, clearing, and settlement, as well as the JSE's strategy for Africa. This presentation highlights the challenges and opportunities for the JSE and its markets.

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Challenges for our Markets: JSE's Future Developments and Africa Strategy

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  1. Challenges for Our MarketsNicky Newton-KingDeputy CEO, JSE LtdAMEDA ConferenceOctober 2008

  2. Presentation outline • What we look like today • JSE in a global context • Global developments affecting exchanges • Future developments • The JSE and Africa

  3. What we look like today • Public listed company • 5 Markets • Equities – listing, trading & regulation of shares, ETF’s and warrants • Equity Derivatives – SSF, index derivatives, can-do options • Agricultural Products – maize, wheat, soya and sunflowers • AltX • Yield-X • Equities and derivatives clearing • Own 100% of Safcom, the derivative clearing house • Settlement • Own just under 45% of STRATE • Guarantee of equity trades • Information product sales • Technology services

  4. JSE in a global context

  5. Global developments affecting exchanges • The world of exchanges is fast changing • This has increasingly led exchanges globally to look for ways in which to: • building strong, vibrant local capital markets • providing issuers with better and more efficient access to capital locally and globally; and • providing retail and institutional investors with more cost effective and easier access to a broader range of investment opportunities • The JSE has not been affected as directly as European and US exchanges by the changes in the regulatory framework. • Many exchanges have sought to counter these challenges by pursuing cross border mergers and acquisitions • JSE has sought closer co-operation with certain exchanges • technology; product range; access

  6. Future Developments - Listings • Increasing demand to standardise the level of information • Move away from multiple listings – just multiple trading venues • Results in: • need to simplify the listings hurdles • likely growth of mutual recognition of the substantive regulatory competency of other regulators • likely move towards globally accepted corporate governance standards and listings requirements – as with IFRS • With this in mind, the JSE’s strategy is to: • develop early leader bi-lateral agreements with exchanges essentially accepting mutual recognition of regulatory competence • Role out Africa Board strategy to attract top quality African issuers • Negotiate listing passports between comparable exchanges • Introduce differentiated listings requirements for secondary listings

  7. Future Developments - Trading • The global nature of capital markets and the increasing importance of large globally active investors means that exchanges are under enormous pressure to: • provide the ultimate investor with as direct an access as possible to the trading system • In Africa, look to link exchanges through technology • Provide robust technology which is able to handle large volumes of orders very fast • Find ways in which investors can execute order with the lowest possible market impact. This has lead to the investors seeking to transact off market hence creating the so called deep pools of liquidity • Ensure that the prices charged by exchanges are as low as possible.

  8. Future Developments - Clearing • Some international jurisdictions have introduced central counterparties in the equities market to facilitate the clearing and settlement of equities transactions. • The JSE • Guarantees central order book equities trades • Has zero failed trade record for 8 years • Does not believe that introducing CCP in South Africa for equities will reduce the costs to participants or indeed reduce the risk of a failed trade

  9. Future Developments - Settlement • The JSE operates a fully dematerialized equities market and electronic settlement of share transactions effected either on the JSE or off-market trade are effected through Strate, the only licensed CSD in South Africa. • In SA, the big ticket items relating to settlement are: • The need to move from T+5 to T+3 – question is impact on guaranteed settlement • The need to reduce the end to end cost of settlement • The need to revisit the settlement model to get to a central ownership register

  10. The JSE and Africa • Long history of engagement • COSSE • To achieve closer regional co-operation • Harmonised listings requirements, no working on technology linkage • ASEA – continental co-operation • Africa Board • Dual listing of top African companies to increase visibility and provide easier access to investors • FTSE/JSE All Africa Indices • Top 40 African issuers listed in qualifying countries • Closer relationship with exchanges • To grow vibrant and diverse local markets

  11. Questions?

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