History and Development About Yield-X
In most major markets in the world, exchange traded interest rate derivatives form a significant portion of a healthy and vibrant market. This is not the case in South Africa where SAFEX interest rate products have enjoyed limited success. In an attempt to identify issues, the JSE consulted with market participants, during which time it became evident that the underlying causes were numerous and diverse and that tinkering on the periphery would not solve the problems. During the consultative process, many market participants suggested that the JSE should initiate a totally separate environment for the trading, clearing and settling of all interest rate products. In so doing the JSE would create a "one-stop yield shop" for a wide range of interest rate products. After careful investigation, the JSE decided to effect such a new system and the concept of Yield-X was born.
About BESA
BESA's roots reach back to the 1980s when two government-appointed commissions investigated the market for public sector securities and financial futures. As a result of their recommendations, the Financial Markets Control Act of 1989 was passed, which led to the formation of the Bond Market Association (BMA) in the same year.
It was this association that was formally licensed as the Bond Exchange of South Africa in 1996. BESA operated as an independent, licenced exchange until 22 June 2009, when it became a wholly-owned subsidiary of the Johannesburg Stock Exchange (JSE) a consequence of BESA’s shareholders agreeing to sell the business to the JSE.
In the thirteen years that BESA operated as an exchange, it effectively delivered on its philosophy of building better markets by providing a range of platforms and services to address the needs of capital market participants, be it issuers, market makers, traders or investors.
The Exchange operated as a mutual association (owned by its members) until December 2007, when it entered a new era, successfully converting to a public company. This was followed by a well supported rights issue which was concluded in October 2008, successfully injecting fresh capital into the business and introducing new strategic partners to the Exchange. In the same month, the JSE offer to purchase the entire issued share capital of BESA was announced, paving the way for a new era in South African financial markets.
The South African bond market is a leader among emerging-market economies. Prior to the transaction with the JSE being concluded in June 2009, bond market turnover reported on BESA in 2008 reached an annual record of R19.2 trillion. Given listed debt securities of R825 billion nominal, overall market velocity (the number of times an exchange ‘turns over’ its market capitalisation) in the local market was 23, up from 17.7 reported in 2007. However, when offshore OTS trades are included, turnover velocity for the year was 29, up from 24 in 2007. As at December 2008, BESA had listed some 1,102 debt securities, issued by 100 sovereign and corporate borrowers, with a total market cap of R935 billion. BESA milestones 1989 to 1995
• The South African bond market is formalised under the Bond Market Association
(BMA)
• SA Breweries is the first corporate to issue a bond
• The Guarantee Fund is established in 1994 in addition to achieving electronic
settlement for the first time 1996 to 2000
• The BMA is licensed as the Bond Exchange of South Africa (BESA) in 1996
bringing about regulation and improved exchange services
• In 1997, BESA introduces t+3 for bonds 2002
• The Resilient Exchange Model (REM) is conceptualised and implemented
resulting in a stronger, more independent and fair governance model 2003
• BTB is released as the electronic platform for the matching of trades in listed
bonds 2005 to 2006
• Intersec (a fixed income derivative platform), ZA Prices (a centralised price
discovery system), inward listings (the possibility for certain organisations that
do not reside in SA to list on BESA) and FSB-approved listed derivatives are
launched
• 2006 – two new indices are launched – the South African Hedge Fund Index and
the Credit Indices 2007
• Govex – the first exchange traded fund for bonds lists on BESA (May)
• Namibian Power Corporation is the second dual-listing on BESA (June)
• BESA reaches record monthly turnover of R1.3 trillion nominal (July)
• BESA authorised users vote in favour of Remote Membership (August)
• BESA demutualises and becomes the Bond Exchange of South Africa Limite
(December)
• African Development Bank listing is the first supranational listing on BESA
• Record annual bond market turnover of R13.8 trillion for 2007 2008
• Justrade.com, the first online binary options exchange in South Africa is
launched (September)
• BESA signs agreements with Nasdaq OMX for the establishment of BondClear
(September)
• Record monthly turnover of R2.01 trillion (September)
• BESA is awarded the accolade for Most Innovative Capital Markets Regulator in
Africa at the Africa Investor Index Series Awards in New York (September)
• BESA successfully completes its capitalisation transaction through a rights issue
and introduction of new strategic partners. R80.8 million in fresh capital injected
into the exchange (October)
• NZX becomes largest shareholder (October)
• JSE Offer is announced (October)
• Record annual bond market turnover of R19.2 trillion for 2008
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