Download - NEW BUSINESS ASSOCIATION between the JSE Securities Exchange South Africa and London Stock Exchange
NEW BUSINESS ASSOCIATIONbetween the
JSE Securities Exchange South Africaand
London Stock Exchange
2 www.jse.co.za
Discussion items
» Global trends and challenges
» JSE reality, vision and strategic position
» JSE/LSE relationship
3 www.jse.co.za
Global Trends and Challenges
» Technological innovation allows for a greater degree of automation, reduction in transaction costs and increase in processing efficiency
» Alliances and partnerships facilitate economies of scale and provide for a single point of access to larger pools of liquidity
» Demutualisation will result in exchanges no longer being owned by their members and allows them to run as independent organisations
» Deregulation enables a greater degree of cross-border trade and investment
The JSE investigated global trends in financial markets to gain insight into its future direction. There are a few key characteristics that are shaping the future:
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What is the JSE Reality ?
1. The JSE cannot maintain the status quo.
3. The JSE must replace JET.
4. The JSE is looking for a broader business relationship.
5. The JSE needs to offer a new information dissemination system.
6. The JSE needs to ensure operational excellence to compete.
2. The JSE must offer SA companies more than what is currently offered.
The JSE is aware of the changes it needs to make.
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JSE Vision
“To be recognised for providing world-class primary markets,
secondary markets and services facilitated by strategic affiliations
while providing a gateway integrating Southern Africa into
the global financial markets”
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JSE Strategic Options into the Global Market
» Aligning with internationally accepted practices
» Providing gateway for SA listed corporates to global markets
» Utilising proven technologies without reinventing established practices and technologies
» Positioning the JSE within it’s geographical area to successfully challenge competitive markets
» Enabling the trade in a wider product range thereby creating economies of scale
» Creating cost competitive structures, processes and infrastructure
An affiliation with a global stock exchange with proven technology would
create the opportunity for the JSE to achieve the following objectives:
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JSE/LSE Deal
The JSE/LSE deal consists of a number of key areas.
Technology
Listings
Membership
Information Dissemination
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JSE/LSE Deal - Technology
» Trading platform run remotely from UK
» Communication link between JSE technology hub in SA and LSE core technology hub in London
» LSE will provide the JSE with a customised, complete and fully functional trading and information dissemination solution which will enable the trade in all counters
The LSE is to provide the JSE with a set of core technology services delivered through the LSE’s Sequence system
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JSE/LSE Deal - Listings
To ensure the JSE is attractive as a gateway to international capital for large SA companies
Prevents further large companies moving their primary listings away from the JSE
JSE will manage the entire listings relationship for companies on the international board - creates an easier route for dual listings with the LSE, which is a potential growth area for new listings
Companies on the international board will be dual primary listed on both the LSE and the JSE
Create an international board with listings requirements acceptable to the LSE and UKLA
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JSE/LSE Deal - Membership
» Members of the JSE authorised as remote SETS participants will be entitled to trade on SETS in addition to any trading entitlement that they have on the JSE by virtue of membership of the JSE
» Members of the LSE authorised as remote JSE participants will be entitled to trade on the JSE in addition to any trading entitlement that they have on the LSE by virtue of membership of the LSE
» Only JSE and LSE members who comply with criteria determined by the LSE and JSE will be accepted as remote participants
A number of core principles of participation by LSE members trading on the JSE and JSE members trading on the LSE are being negotiated (remote participation)
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LSE JSE
Local LSE Participants Int. LSE Participants
Int. JSE Participants Local JSE Participants
Segment
Partici-pants
KEY:OA – Opening AuctionCA – Closing Auction
Segment 1:
SETS 184 Board
Segment 2:
UK International
Board
Segment 4:
International JSE Board
Segment 5:
Local JSE Board 1
Segment 6:
Local JSE Board 2
Segment 7:
Local JSE Board 3
Order-driven
OA, CA
~ 184 UK Stocks
(GBx)
Order-driven
OA, CA
~ 40 – 60 SA Stocks
(GBx)
Order-driven
OA, CA
~ 40 – 60 SA Stocks
Order-driven
OA, CA
Other Liquid SA Stocks
Order-driven
OA, IA, CA
Illiquid SA Stocks
Quote-driven
MM
Possible Illiquid Stocks
Dual Primary Listed JSE Primary and Other Secondary Listings
What are the implications regarding Membership and Listings ?
Segment 3:
International UK JSE Board
Order-driven
OA, CA
~ 184 UK Stocks
Segments
Listing
Segment
Charac-teristics
Exchanges
Segment 8:
NSX Board
Order-driven
OA, CT, IA
. . . CT, CA
NSX Stocks
(ZAc) (ZAc) (ZAc) (ZAc) (ZAc) (ZAc)
IA - Intraday AuctionMM – Market MakersInt. - International
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JSE/LSE Deal - Information Dissemination
» JSE information will be disseminated on the same technology platform as the LSE
» JSE will market LSE information in Africa subject to LSE contract
» LSE will market JSE information in rest of world subject to JSE contract
The LSE and the JSE will market each other’s share price information thereby providing greater access to such information
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Key Issues
• Indices
• Exchange controls
• Regulatory buy-in / support
• Market participation and support
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Functionality
Technology
RealisableStrategic Benefits
• Natural strategic partner• European accessibility• Listings reciprocity• Improved liquidity• Cross-membership• Improved integrity• Central Counter Party• Joint marketing• STRATE/Crest association
Valu
e t
o J
SE
Strategic Benefits
The LSE strategic option provides a world-class trading platform used by the world’s third-largest market place.
LSE Strategic Affiliation
Benefits for the JSE• Access to global markets• World class trading solution• Joint development of new products and dual listing and/or trading thereof• Access to increased pool of liquidity• Enhanced image and brand of JSE• Knowledge sharing
Benefits for the LSE• Global business relationship outside of Europe• Commercial gain• Improved shareholder return• Enhanced executive leadership reputation• Proof of technology and implementation• Knowledge sharing
Questions