JSE Ltd remains resilient in time of increased flux
August 18, 2010
JOHANNESBURG, 17 AUGUST 2010. The 14.5% increase in revenue
combined with controlled operating costs led the JSE Limited, the company that
operates the Johannesburg Stock Exchange, to report a 13.1% increase in net
profit after tax to R207.6m (H1 2009: R183.5m).
“These results come at a
time of increased competition in the global exchange industry, the growing
success of alternative trading venues and increased regulation of both exchanges
and the trading of financial products to try to reduce the chance of another
financial fallout on the same scale as the global financial crisis,” says
Russell Loubser, CEO of the JSE.
Global financial markets have also
experienced fluctuating investor sentiment which has been echoed in the local
market. The increased volatility has been good for the JSE Ltd. Group revenue
climbed 14.5% to R623.3m (H1 2009: R544.5m) largely owing to increased trade on
the spot equities market. Foreigners were again net investors, investing R19.1bn
in South African equities and R36.2bn in local bonds. Liquidity on the equities
market rose to 53% for the period (H1 2009: 48.8%). Investors are slightly less
hesitant about equity derivatives and commodity derivatives recovered somewhat,
rising 15.9% to R20.6m (H1 2009: R17.8m). As a result, the overall performance
of the Group remained resilient.
As a predominantly fixed cost business,
with technology and people comprising the main expenses, the JSE’s expenses
increased 13.3% to R393.2m (H1 2009: R347.0m) largely due to an increased
headcount as a result of the BESA acquisition as well as additional IT
The Group’s revenue for the period is derived from diverse
Listings - Six new company listings occurred
during first six months of 2010 - five on the main board (including Wilderness
Safaris on the Africa Board) and one on AltX – compared with four for the same
period last year. This is in line with listings numbers on member exchanges of
the World Federation of Exchanges. Revenue in the JSE’s Issuer Services
division, which handles new listings, increased 17.5% (H1 2010: R45.8m; H1 2009:
Spot Equities market - The number of spot
equities market transactions rose 22.4% (H1 2010:12.2 million; H1 2009: 10.0
million), generating revenue of R164.8m (H1 2009: R145.3m), a 13.5% increase. In
line with their global counterparts, the equities team continued to focus on
marketing their products and services more broadly to their customer base during
1. A new billing model was introduced in March 2010 to
reduce total trading costs, encourage high frequency trading and reward high
volume participants. Trade volumes have increased since.
2. The exchange
added an anonymous trading facility which allows for the execution of large
trades through hidden order functionality in the central order book.
JSE continued to pursue its strategy of increasing the financial knowledge of
South Africans in order to increase the number of retail investors and add to
4. New product innovation continued. A new range of commodity
warrants and collective investment products including exchange traded funds were
introduced. New products were also added on other JSE markets.
Equity derivatives market – contracts traded in this
market rose by 6% to 84.2m (H1 2009: 79.4m). The biggest increases came from
international derivatives. Value traded rose 26.2%. Despite this, revenues eased
0.7% to R53.3m (H1 2009: R53.7m) mainly owing to two shifts in the product mix:
first, a move from options to futures and second, a drop in the value of Can Do
derivatives traded during H1 2010 compared with the previous period. In an
effort to bring greater liquidity and encourage greater activity and
transparency, the JSE adopted a maker-taker model for its equity derivative
market effective 6 July 2010. The JSE is already noticing increased use of the
upgraded derivatives engine following the introduction of the new pricing.
Commodity market - derivatives contracts traded
increased by 12.1% (H1 2010: 1 011 712; H1 2009: 902 370). Commodity options
accounted for most of this growth, owing to volatility in agricultural prices at
the start of 2010. This shift in product mix impacted favourably on revenues
which rose 15.7% to R20.6m (H1 2009: R17.8m) during the period.
The Interest Rate market generated trade reporting
revenue of R16.4m. Reported cash volumes in H1 2010 climbed to R7.33 trillion
(H1 2009: R6.88 trillion).
Revenue generated by the Information
Products Sales division, which is focusing on new and existing offshore
clients in a tough market following the downsizing of several global
institutions, climbed 6.5% to R58.7m (H1 2009: R55.1m). Marketing efforts are
currently focused on the FTSE/JSE Equally-Weighted Top40 Index, launched during
the period. Live terminals numbers for corporates have stabilised in contrast to
those lost during 2009.
2010 is a
year of consolidation for the JSE:
Following the BESA acquisition,
dialogue continues with interest rate market participants and industry groups to
introduce a strategy which will succeed in growing the exchange traded interest
spot and derivative market.
The JSE continues to pursue its Africa
strategy. The Africa Board, which aims to encourage African companies domiciled
outside South Africa to take a secondary listing, welcomed its second listing,
Wilderness Safaris in April 2010. The JSE looks forward to welcoming some new
listings in the coming period;
The JSE continues along the path of
replacing its back office technology. This is in test phase and initial tests
have been satisfactory.
The JSE will continue to focus on increasing
liquidity and improving the competitiveness of the exchange, however as a
significant portion of revenue is dependent on the level of trades on the
exchange, the JSE is unable to predict future profits.
In the equity
derivatives market, the exchange continues to encourage on-exchange central
order book trading. It will also work on providing services to clients who
previously traded off-exchange but who now want to trade on-exchange to manage
In August 2010, additional hard commodity instruments – silver and
copper derivatives – were launched under licence from the CME Group.
“The JSE remains committed to delivering value to issuers and investors.
The consistent focus is on building a sustainable business model, with depth and
breadth. The Board is optimistic that this should be achieved through achieving
its strategic objectives, combined with the strength of JSE regulation and the
quality of the JSE’s service,” concludes Loubser.
information, please visit www.jse.co.za
About JSE Limited
Africa’s only full service securities exchange, the JSE connects buyers and
sellers in four different financial markets, namely equities, equity
derivatives, agricultural derivatives and interest rate instruments. The JSE Ltd
offers the investor a truly first world trading environment, with world class
technology, surveillance and settlement in an emerging market context. It is
amongst the top 20 largest equities exchanges in terms of market capitalisation
in the world.
FOR FURTHER INFORMATION PLEASE
Roz Thomas/Victoria Williams
Consultants (Pty) Ltd
Tel: +27 11 783 8926
Mobile: (0)82 925 8806 and 072 452 1772
+27 11 520 7080
Mobile: (0)83 395
ON BEHALF OF:
Tel: (011) 520 7001