Bond Exchange of South Africa

The Bond Exchange of South Africa Limited (BESA) is an independent, licensed exchange, constituted as a public company, and responsible for operating and regulating the debt securities and interest rate derivatives markets in South Africa.

History

BESA was granted its exchange licence in 1996.

In 2007 the BESA partnered with the OECD in workshops on African Debt Management. In December 2007 BESA converted from a mutual association to a public company. As a demutualised exchange, BESA is able to raise capital to grow its business, diversify revenues and accelerate the development of financial market infrastructure in South Africa.

Rules and protections
As the direct regulator of the bond market, BESA operates within the framework of the Securities Services Act 2004 and a set of rules and directives approved by the Financial Services Board (FSB). BESA's rules and directives serve as a tool for regulating both issuers and trading participants. All securities listed by the Exchange must meet minimum disclosure standards.
Extensive rules also apply to trading participants, with BESA undertaking active surveillance over all aspects of market activity as well as requiring compliance with a variety of best-practice standards. The Exchange provides various investor-protection mechanisms, including a guarantee fund to compensate counter-parties for any market movement losses arising from a trading default. No participant defaults or claims on the fund have ever been lodged with BESA.

Turnover
The South African bond market is a leader among emerging-market economies. Turnover reported on BESA in 2007 reached a record R13.8 trillion[citation needed]. Given a nominal value for listed debt securities of R781 billion, and a locally-settled total turnover of R18.6 trillion, overall market velocity in 2007 grew to 23.8 times from 20.4 times the previous year.

South Africa’s local bond market is still dominated by securities issued by the South African government, with local government, public enterprises and major corporations accounting for the rest of the debt issuers active in the market. The number of borrowers and listed bonds as well as the market capitalisation have all risen sharply – at December 2007 BESA had listed some 967 debt securities, issued by 104 sovereign and corporate borrowers, with a total market capitalisation of R862 billion

The South African Futures Exchange

The South African Futures Exchange (Safex) consists of a financial markets division (equity derivatives) and an Agricultural Markets Division (AMD) - agricultural derivatives.
The measures of the financial markets division have grown from R3.4 million at its formation in 1990 to R69 million at June 1997. Safex has experienced a growth of 10.36 million contracts during he 1996/97 financial year, a year-on-year increase of 35 percent.

AMD was formed in 1995 and by 30 June 1997, the net reserves amounted to R3.2 million compared with the original operating forecast of R1.4 million.

Safex has kept abreast of developments in the world financial markets, and continues to make steady progress despite intensifying competition from international derivative exchanges and over-the-counter alternatives. The Safex reserves have grown sufficiently to allow a significant reduction in the fees it levies per future or options contract. Consequently, all fees were reduced by 50 per cent in 1997 and the changes on allocated trades were removed.

The Exchange is directed by an executive committee consisting of up to 11 elected members all with full voting rights, and an additional non-voting nominated people that the executive appoints. Policy decisions are made by the committee and carried out by a full-time management team headed by the CEO.

The Exchange is governed by members, but through their use of the exchange services, they are also its clients. The exchange is a Self Regulatory Authority and exercises its regulatory functions in terms of the Financial Markets Control Act, 1989 and its rules. The Exchange, in turn, is supervised by FSB.

JSE Securities Exchange

The JSE Limited (previously the JSE Securities Exchange and the Johannesburg Stock Exchange) is the largest stock exchange in Africa. It is situated at the corner of Maude Street and Gwen Lane in Sandton, Gauteng, South Africa. In 2003 the JSE had an estimated 472 listed companies and a market capitalisation of US$182.6 billion (€158 billion) as well as an average monthly traded value of US$ 6,399 million (€5.5 billion). As of 30 September 2006, the market capitalisation of the JSE was at US$579.1 billion. The JSE is presently the 16th largest stock exchange worldwide.

The JSE is planning to create a pan-African exchange by initially enabling investors to trade in shares from Ghana, Namibia, Zimbabwe and Zambia. Later it will expand this across the rest of Africa.

History

The discovery of gold on the Witwatersrand in 1886 led to many mining and financial companies opening and a need soon arose for a stock exchange.

The Johannesburg Exchange & Chambers Company was established by a London businessman, Benjamin Minors Woollan and housed at the corner of Commissioner and Simmonds Streets. Out of this the JSE Securities Exchange was born on November 8, 1887. By 1890 the trading hall became too small and had to be rebuilt but this too was outgrown. Trading then moved into the street. The Mining Commissioner closed off Simmonds Street between Market Square and Commissioner Street by means of chains.

In 1903, a new building was built for the JSE on Hollard Street. It was a storey building that took up an entire whole city block bounded by Fox and Main, Hollard and Sauer Streets.

After World War II, it became apparent that this building was again inadequate and in 1947 the decision was made to rebuild the stock exchange. It took 11 years before construction began and in February 1961 the second exchange at Hollard Street was officially opened. By 1963, the JSE became a member of the Federation International Bourses de Valeurs (FIBV).

In 1978, the JSE took up residence at 17 Diagonal Street near Kerk Street, Johannesburg. 1993 saw the JSE become an active member of the African Stock Exchanges Association. After 108 years, the open outcry system of trading was changed to a new era of high-tech computer trading on June 7, 1996.

In September 2000, the Johannesburg Securities Exchange moved to its present location in Sandton, Gauteng and changed its official name to the JSE Securities Exchange.

In 2001 an agreement was struck with the London Stock Exchange enabling cross-dealing between the two bourses and replacing the JSE's trading system with that of the LSE.

About the JSE

The JSE provides a market where securities can be traded freely under a regulated procedure. It not only channels funds into the economy, but also provides investors with returns on investments in the form of dividends.

The exchange successfully fulfils its main function - the raising of primary capital - by rechannelling cash resources into productive economic activity, thus building the economy while enhancing job opportunities and wealth creation.

The exchange is directed by an honorary committee of 16 people, all with full voting rights. The elected stockbroking members, who may not number less than eight nor more than eleven, may appoint an executive president and five outside members to the committee. Policy decisions are made by the committee and carried out by a full-time executive committee headed by the executive president.

The JSE is governed by its members but through their use of JSE services and facilities, these members are also customers of the Exchange. Although there is only one stock exchange in South Africa, the Stock Exchanges Control Act does allow for the existence and operation of more than one exchange. Each year the JSE must apply to the Minister of Finance for an operating license which vests external control of the exchange in the FSB.

The JSE makes use of fully automatic electronic trading on the JET System (Johannesburg Equities Trading). The System is an order-driven automated trading system acquired from the Chicago Stock Exchange, which has successfully installed the system at several other exchanges around the world.

The system was modified to suit the JSE's specialized needs. The order book is organized on the principle of "price/time" priority where orders registered in the book are ranked first at the best price and then in time sequence of the entry. The JET System has already resulted in significant improvements in transparency, price formation liquidity and cost of trading on the JSE.

In August 1997, the JSE launched the real-time Stock Exchange News Service (Sens) to enhance the market transparency and investor confidence. Initially, it was optional for listed companies to use the Service during its two-month trial period. From October 15, augmented JSE listing requirements oblige companies to disseminate any corporate news or price-sensitive information on the Service prior to using any other media outlet. Sens is carried by all the major wire services.

A Memorandum of Understanding was signed between the banks (represented by BankServ) and the JSE on 2 May 1996, to establish an electronic settlement system for the South African equities market. Known as STRATE (Share Transactions Totally Electronic), this development will be enabled through the dematerialization of equity scrip in a Central Securities Depository. This will facilitate settlement and the transfer of ownership by electronic book entry. The electronic system is vital to enhance the security of settlement in the market and bring South Africa in line with international practice.

Hours

JSE's normal trading sessions are from 09:00am to 05:00pm on all days of the week except Saturdays, Sundays and holidays declared by the Exchange in advance.

Alternative Exchange

The Alternative Exchange is a stock exchange that was founded as a division of the JSE in order to accommodate small and medium sized high growth companies. Its website is accessible from the front page of the main website of the JSE. The Alternative Exchange is known as AltX.

Ownership

The bourse is operated by the JSE Limited, a company that listed on its own main board in June 2006