4AX goes live with two issuers using Strate’s settlement services

Strate welcomes the news that its client – one of South Africa’s newest exchanges, 4 Africa Exchange (4AX) – announced its first two issuer listings on the Exchange – NWK Limited and NWK Holdings Limited.

 

NWK used to trade shares in the over-the-counter market. However, changes to financial market legislation and regulations meant that companies like NWK had to trade these shares on a formal market.

 

The changes to regulation was one of the reasons that led to the creation of 4AX, which intends to provide a formal trading platform for the over-the-counter equities market. The company has indicated that it would broaden this to medium-sized enterprises, real estate investment trusts, restricted schemes and special purpose vehicles given that its licence allows it to serve multiple asset classes.

 

At the beginning of September 2016, the Financial Services Board notified the market that it had granted 4AX an exchange licence. Strate was appointed by 4AX to provide it with central securities depository and settlement services. 4AX offers investors a T+3 settlement cycle, allowing trades matched on its system to be cleared and settled within three business days after the trade date.

 

Gregory Naicker, the General Manger Product Development at Strate, says, “Strate welcomes the news of 4AX’s inaugural listings and we would like to commend 4AX on their historic milestone.”

 

According to news sources, 4AX is targeting nine more companies across the construction, engineering, hospitality, property development and tourism, two of which are expected to be inward listings.

 

Below are images of Greg Naicker with the 4AX executive team, as well as the NWK executive teams:

 

 

The future of South Africa’s capital markets: Far from lacklustre

South Africa has one of the most sophisticated financial markets and has earned a reputation for its sound financial market development. Looking to the next five years, A2X Markets CEO and co-founder Kevin Brady believes the market could become more dynamic and efficient as new exchanges are granted licences.

 

A2X Markets was officially granted its licence by the Financial Services Board in April 2017, becoming the country’s fourth licenced South African exchange and Strate’s newest client. During an interview at A2X’s offices in the heart of Sandton, Johannesburg, Brady had an informative discussion with Strate to describe his company’s business model and settlement cycle.

 

He explained that A2X, as an alternative exchange, would bring modern technology and the latest business techniques to an industry that’s been around for hundreds of years. “A2X will target many of the largest companies currently listed on the JSE, to secondary list on A2X. It will then offer brokers material discounts to transact in these shares, while maintaining the high standard of regulation as set by the Financial Market Act,” he says, while describing the exchange’s business model. By way of an example, he explained the secondary listing principal is well established in South Africa and is the same as a dual listing, where a company has a primary listing on the London Stock Exchange, such as Anglo America and BHP Billiton, and a secondary listing on the JSE.

 

A2X’s model fits into the current capital markets structure, including adopting a familiar T+3 post-trade settlement cycle. “With that, we understand how vital it is to have a renowned and reliable settlement infrastructure, which is why we appointed Strate as the Central Securities Depository for A2X. Strate is open for business and it has been very welcoming of new exchanges.”

 

Beverley Furman, the Managing Executive of CSD Operations, a division of Strate, adds, “This is a very exciting time for our financial markets. As an investment destination, South African capital markets are unique in the sense that they operate on developed first-world infrastructure and the market is well regulated.” A testament to the regulation of the country’s stock exchanges is the ranking highlighted in the 2016-2017 World Economic Forum’s Global Competitiveness Index, which has placed South Africa as the third best ranked country globally (among 138 developed and developing nations) for the regulation of securities exchanges.

 

Furman concludes that Strate is proud to be part of this journey and to be recognized as the independent, trusted service provider within the market. “We are delighted to welcome A2X as the newest player to the South African capital markets and as Strate’s newest client.”

 

 

 

Strate uses its robust technology to service multiple markets

Strate, a South African Central Securities Depository (CSD), has shown the robustness of its clearing and settlement technology by offering equities settlement to multiple markets.

 

On 28 February 2017, it welcomed 4 Africa Exchange (4AX), the country’s newest exchange which focuses on listing companies that are currently trading over-the-counter (OTC) shares in Broad-based black economic empowerment (B-BBEE) schemes as well as limited participation schemes.  4AX successfully integrated their exchange into Strate’s clearing and settlement platforms. 4AX offers investors a T+3 settlement cycle, allowing trades matched on its system to be cleared and settled within three business days after the trade date.

 

At the beginning of September 2016, the Financial Services Board notified the market that it had granted 4AX an exchange licence. Strate was appointed by 4AX to provide it with central securities depository services.

 

Beverley Furman, the Managing Executive of CSD Operations, a division of Strate, says, “This is an exciting time for the capital markets. Three years ago, companies that had been trading OTC shares in B-BBEE schemes were instructed by the Registrar to license their over-the-counter platforms as a regulated exchange, or stop such trading activities, or apply for exemptions. Now the country has a dedicated exchange in the form of 4AX that can serve these companies.”

 

“Strate has been built on an 18-year foundation of trust, where we can be relied on by the markets to provide pioneering solutions that cater directly for their needs. The strategic focus has been on the evolution and strengthening of Strate’s core services. As we extend our services to multiple exchanges across multiple markets, it cements this notion, as well as our independence and high levels of operational excellence.”

Strate: A Pioneer of Exchange-of-Value Settlement Solutions

All too often, good infrastructure goes unnoticed. This is probably one of the reasons why few South Africans know and understand the country’s Central Securities Depository, Strate, however, without it, investors would shy away from South Africa.
Prior to the implementation of Strate in 1999, SA was categorised as one of the worst emerging markets in terms of operational and settlement risk. Trading volumes on the stock exchange were averaging 4,000 trades daily, very thin when this is compared to the 350 000 on average during a month today.

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Infographic: Strate Fast facts

From a Thomas Murray AA- rating, to Strate being ranked among the top Central Securities Depositories globally, click here to view an infographic that tells you all the fast facts that you need to know about Strate.

 

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Trusted to be an Independent Provider of Custody and Settlement Services

Strate’s success lies in its independence and good corporate governance. It has continued to be a trusted and independent party in the market, which is evident by Strate offering CSD services to new stock exchanges.

 

At the beginning of September 2016, the Financial Services Board notified the market that it had granted ZARX and 4 Africa Exchange (4AX) exchange licences, with conditions. Strate has been appointed the Central Securities Depository for both exchanges and will continue to explore further opportunities with other bourses.

 

Strate looks forward to working with its current and new clients in the years ahead.

 

 

Settlement History Being Made with T+3

On Monday 11 July 2016, history was made. The JSE’s equities market, which used to run on a five business day settlement cycle for the past few decades, moved to a new three business day settlement cycle (T+3). This formed part of a project spearheaded by the JSE.

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South Africa’s new stock exchange, ZAR X, partners with Strate

In March 2016, ZAR X, South Africa’s new exchange, announced that it had been granted conditional approval from the South African Financial Services Board to operate. ZAR X’s first milestone after receiving its conditional licence was to announce its partnership with Strate.

 

A key factor in the relationship with Strate to date has been the close collaboration in the development of T+0 settlement, or same day settlement of trades, minimizing the time-lag between matched trade and settlement and clearing into an investor’s account. The ZAR X approach also mitigates settlement risk as transactions are pre-funded.

 

Etienne Nel, CEO of ZAR X, commented: “Strate has made T+0 settlement possible for our clients, which is significantly shorter than the current T+5 turnaround on offer. We are delighted to be partnering with a reputable partner like Strate – the ideal operator to provide our clearing and settlement services because of its proven track record and its trusted and independent third-party status.”

 

ZAR X will benefit from the same robust infrastructure that is currently in place for the clearing and settlement of trades. Strate will further collaborate with ZAR X to ensure that their systems can fully integrate into its clearing and settlement platforms prior to going live. This demonstrates that Strate is in a position to create innovative and responsive services in the interest of a common goal: to grow and enhance the liquidity and sustainability of the financial system in South Africa.

 

ZAR X is scheduled to begin operations in September 2016 and will offer simple, fast and affordable platforms for corporate listings and share trading, with strong focus on the market in restricted equity offerings, primarily black empowerment securities.

 

CEO of Strate, Monica Singer: “ZAR X will benefit from the same robust infrastructure that is in place for the clearing and settlement of trades. Strate will collaborate with ZAR X to ensure that their systems can fully integrate into its clearing and settlement platforms prior to going live. This demonstrates that Strate is open for business and is in a position to create innovative and responsive services in the interest of a common goal: to grow and enhance the liquidity and sustainability of the financial system in South Africa.   We look forward to building an ongoing and sustainable relationship with ZAR X.”