JSE soon to host the General Assembly of World Exchanges
September 20, 2011
By Humphrey Borkum, Chairman of JSE Limited.
As the JSE prepares to host the 51st general assembly and annual meeting of
the World Federation of Exchanges (WFE) in Johannesburg next month, South Africa
can be proud of the status and quality of the financial institution that will
welcome the delegates.
In the latest Global Competitiveness Report of
the World Economic Forum the JSE was once again placed first in terms of market
regulation and we have now moved up from seventh to fourth in the provision of
equity market finance. Also pleasing is that in the soundness of our banks we
have moved up four places to second. Our highly-rated accountancy firms repeated
their first place in strength of auditing and reporting standards.
always remind myself that this is South Africa Inc. competing with 138 other
countries and the comparison is not merely against developing countries but
against the top developed countries in the world. Congratulations are due to all
concerned and also to the financial departments in government.
is the association of 52 regulated exchanges around the world that develops and
promotes standards in markets. WFE exchanges are home to over 45 000 listed
companies. Total market capitalisation of WFE members in 2010 amounted to 54
trillion dollars with approximately 63 trillion being traded on member exchanges
in the same period. We are expecting 180 delegates from over 40 countries.
This assembly represents the largest and most widely attended gathering
of global exchange leaders. Russell Loubser, CEO of the JSE, is both a director
and treasurer of the WFE. As he says: ”Exchanges stand in line and compete for
this honour just like for the Olympics or the Soccer World Cup. Once you have
earned the respect and confidence of the international stock exchange community
you are in contention. “
I personally regard this as a great opportunity
to showcase both the JSE and our country. It is something the JSE has been
lobbying for over the past 12 years. Delegates will find an exchange that has
been in existence for 123 years and has evolved into a world class entity over
the past 15 years . The JSE is Africa’s only multi-product bourse and through
our Africa Board our strategic aim is to provide access for investors seeking to
tap into Africa’s growing wealth.
Our exchange has well over 40
different product offerings ranging from ordinary shares, single stock futures,
bond futures to grain futures and options. We now connect buyers and sellers in
six specialised financial markets namely equities, equity derivatives, currency
derivatives, interest rate derivatives, commodity derivatives and bonds.
Over the four days delegates will attend six different workshop panels
on such topics as Regulatory Winds, Exchange Business Models, Interest Rate
Products, Fragmentation, Exchange Mergers & Acquisitions and Innovation in
The panel on Innovation is of particular interest to me
as it questions what exchanges are now doing differently than five years ago in
terms of products, services and technology. How will the financial market
ecosystem evolve and what role will exchanges play in it? In what new ways
should exchanges be looking to work with different client constituencies and how
are clients looking at working with exchanges?
If the JSE wishes to
remain relevant in a highly competitive industry we must remain abreast of
technological advances. Speed is becoming increasingly important in the exchange
industry as exchanges cope with the rapid rise of high-frequency trading.
Therefore over the past ten years we have spent over R2 billion in improving our
IT systems. Moreover, early next year the JSE’s equity trading system will be
relocated from London to Johannesburg onto a trading platform provided by
MillenniumIT. This will not only enhance operational efficiencies but JSE
members will be able to execute transactions 400 times faster than is currently
Through conservative budgeting we have already paid for most
of the new data centre. This enabled our directors to declare a special dividend
of 210c per share after our half-year to the end of June.
As SA is a developing country suggestions have been made that the
JSE should investigate some type of Mzansi -style account with the aim of
increasing the number of private investors who invest directly on the JSE. A
Mzansi account is an affordable banking facility offered by five South African
banks to make banking more accessible to previously unbanked communities.
However it should be borne in mind that investing directly on the JSE is
not a bottom of the financial pyramid engagement. My personal philosophy is that
private investors should not invest on the JSE unless they can afford a
diversified portfolio of five to ten stocks. Because of the risk involved,
buying shares should not be as easy as an impulse purchase off the shelves of a
supermarket. The JSE is not a casino and too many small investors invest money
they can’t afford to lose in a stock on the basis of rumour or whim. I would
also emphasise that no one with any kind of debt should consider investing on
We must not lose sight of the fact that in South Africa there
is compulsory legislation that salaried employees have to invest in retirement
funds of some form or another. As most pension and provident funds have at least
a portion of their investments in listed equities this means that South Africans
from all walks of life have savings invested on the JSE.
individuals interested in dipping their toes into the share market for the first
time I would highly recommend that they start with collective investment schemes
like unit trusts and exchange traded funds (ETF’s). ETF’s are low cost, passive
investments that track a given index or asset and are not actively managed like
The first South African ETF was listed on the JSE in
November 2000 and there are currently 30 ETFs listed on the JSE by eight
different ETF providers. The range includes local equities, international
equities, dividend, bond, property, gold bullion and a multi-asset class. Their
main benefit is to enable an individual to invest in a wide variety of
securities via a single investment product thus reducing the risk of investing
in a single company. Investors can also follow the progress of the companies
within their fund and thus over time acquire the experience and confidence to
invest directly in individual companies.
There are a number of ways to
invest in ETFs - through a JSE authorised stockbroker, through a number of
internet based websites (etfSA or iTransact) or through an ETF provider’s
investment plan. I would recommend an investment plan for those who do not have
much disposable income or access to a computer. With this option an investment
can be made with the minimum lump sum of R1000 or a minimum monthly debit order
of R300. This is also an ideal vehicle for parents or grandparents who wish to
put money aside for schooling.
However, once again I would urge caution.
Firstly I would advise investment over at least a five to seven year period and
secondly enquire about the risk profile of the fund where you are placing your
money. If you have an investment horizon of 20 years, go for an ETF tracking
indices with a high concentration of shares. If short term volatility worries
you look for funds which have a cash and bond portion as these give some
protection on downside risk.
A simple call to the JSE (011 520 7000) is
all it takes to reach a number of people who will provide help and information
on the various ETF’s and how to get started. The JSE website, www.jse.co.za, is also a mine of information.
This article first appeared in Business Report