A2X CFO Otsile Matheba shares how Africa’s second biggest stock exchange is changing the game

Otsile explains that a secondary listing option creates an alternative trading venue so investors have choice.

The Visionary CFO Series is sponsored by A2X Markets.

A2X Markets has become Africa’s second biggest stock exchange by market value. It is an alternate exchange that provides the market with an efficient and cost-effective trading venue to secondary list and trade shares. A2X CFO Otsile Matheba says in its four years of operation the number of listed instruments on the bourse has increased to more than 50, with a combined market value of about R4.6 trillion.

A2X is a stock exchange committed to bringing real growth, choice and value to the South African marketplace.

Like the visionary CFOs featured, the team at A2X understand the importance of making the numbers work for you. Through lower exchange fees and narrower spreads, A2X is able to make significant savings available to the market. Have you empowered your shareholders with the opportunity to capture these benefits?

Increased value
A2X offers brokers an additional platform on which to trade shares and to enable better pricing in the form of narrower bid offer spreads and exchange fees.

A secondary listing on A2X provides investors with a choice of venue to transact and is therefore complementary to the company’s primary listing. A2X’s main value proposition is fee savings for investors, with the company estimating the potential savings unlocked for end investors to be upwards of R1.2 billion a year.

Competition and innovation
The option of a secondary listing creates an alternative trading venue so investors have choice. Otsile explains: “For a very long time in South Africa we only had one venue on which to trade shares. A secondary listing is an established process globally, which is what investors had been calling for. We are proud to be the ones who have brought it to South Africa.”

A2X prices are aligned with the JSE but the bid and offer prices are more competitive, while the exchange fees are around half those of the JSE’s. Those cost savings are passed on, resulting in material savings for the end investor.

With its business model focused on cutting transaction fees and growing the market as a whole for investors and brokers, the exchange uses the latest high-performance exchange technology to help enable them to offer large fee savings on the end-to-end cost of transacting.

“We have found that we grow the market just through our presence. With our lower fees, international investors who previously found South Africa to be too costly are now looking at our market too. From an initial market cap of R30 billion in 2017 to R4.6 trillion currently, growth has been explosive, and there is still a lot of room to grow. We see a lot of opportunity,” says Otsile.

He explains that greater competition in the market drives more innovation and offers better options for shareholders and makes a market more attractive. “South Africa has traditionally been viewed as a high cost to trade destination. Investors are very sensitive to costs and because of our offering, we are playing our part in helping grow the overall market and have attracted greater liquidity.”

Of the 52 listed companies and exchange traded products on A2X, 10 are constituents of the Top40 Index and these include well-known names such as Prosus, Naspers, Mr Price, Growthpoint, Standard Bank, Sasol, and Aspen, among others.

Opportunities for CFOs
Fulfilling listing requirements have been an added burden for CFOs who have listed companies. Otsile explains that A2X’s secondary listing process is a very simple one. “There are no additional regulatory requirements over and above those of the primary exchange. As long as you remain in good standing with your primary market, we are happy” Otsile says.

The company simply needs to provide its authorisation by signing a two-page document and because A2X requires the company to adhere to the listing requirement of its primary exchange, there is no lessening of governance standards .” A2X is regulated by the Financial Sector Conduct Authority and the Prudential Authority, and Otsile points out that being a new entrant, the entity has to be more prudent so as not to introduce risk into the market.

Over and above this, there is no fee to list or ongoing fees to remain listed on A2X. “As a CFO, looking out for shareholders, a secondary listing offers them a choice on where to transact and significant cost savings,” says Otsile.

Alignment to international best practice
In 2019 A2X received regulatory approval to host secondary listings of exchange-traded products and a licence extension to include inward listings of foreign companies from approved jurisdictions outside of our borders. Otsile explains that, “Now we can access companies that aren’t on the JSE, widening the variety in South Africa. We have been approached by companies abroad, wanting to explore the opportunity to secondary list in South Africa.”

The international norm for secondary listings is that with an exchange licence similar to A2X’s would allow them to list every single company on the primary exchange in what is commonly called an admitted trade model. In South Africa a secondary exchange still has to seek permission from every company to have a secondary listing, therefore domestic legislation is not yet fully aligned with international best practice. Despite this, many companies are seeing the benefits.

Currently, A2X’s focus is on expanding the range of securities available for trade on its platform and it is also looking at bringing new innovative trade types to the South African marketplace. “We are seeing an opportunity to play a bigger role in making the secondary listings market more efficient and attracting new players. explains Otsile. “As a CFO, being so close to the numbers and understanding the savings myself, I think every listed company should be considering a secondary listing on A2x.”