Jacques Magliolo reports on the CBD’s captive market, the stockbroking fraternity
STOCKBROKERS are unlikely to abandon the Johannesburg Stock Exchange (JSE) building in a mass exodus once automated trading is implemented.
This is the feeling of a number of stockbrokers, who were responding to media speculation that once an automated trading system (ATS) has been set up and is fully operational there will no longer be a need to have a trading floor.
If the JSE’s trading floor becomes obsolete, then stockbrokers can logically trade from anywhere in the country. However, those who may have made contingency plans to move may find such plans premature.
A number of problems have to be ironed out before there is enough clarity for stockbrokers to consider moving out of downtown Johannesburg, which has become a hotbed of muggings and hijackings.
The first is JSE directive AB5, which sets borders within which stockbrokers have to be based. These are literally one block around the JSE and include West Commissioner, Simmonds and Bree Streets.
For this reason stockbrokers operating in other towns align their businesses to existing stockbrokers based in Johannesburg, as branches of those firms. JSE director of operations Neil Carter confirms that “stockbrokers cannot presently operate from beyond these borders without prior consent from the JSE
It is, therefore, market analysts’ belief that it is unlikely the JSE committee would give any stockbroker permission as this would result in a mass exodus from the building.
Stockbrokers are in a no-win situation. They own the JSE building, which is valued at R80-million, and the JSE Annex (R40-million). They have to find a buyer for the building before they can leave. This would not be much of a deal without tenants, particularly in the Johannesburg central business district (CBD).
If they do find a buyer for these buildings, conditions would be set and would probably include a renewed three year (or possibly longer) lease. Arthur Thompson, head of research and director at E W Balderson, says: “If an institution offers to buy the building, then they are more than likely going to insist that new leases are signed by everybody.”
“These are problems which have to be sorted out before banks become corporate members on November 8,” says Carter, adding that there are “temporary alternatives to selling the building for cash.”
The trading floor need not become obsolete. On Wall Street, dealers and market makers operate on the trading floor and still use computers. Carter agrees this is an option, but stresses no decision has yet been made by the committee.
Another problem facing stockbrokers who leave for other areas is a technical one. Trading via computer has to be safe and secure which means additional safeguards have to be implemented. Cables would be installed in the existing JSE buildings, but stockbrokers would have to spend millions of rands to link up with this system. Less direct technology would be cheaper, but less safe.
One option is to downsize operations at the JSE and move the executive members out of the CBD. Their dealers, market makers, scrip departments and administrative staff would operate from the JSE and stockbrokers would link up via computer. This is a likely long-term scenario, particularly when share scrip also becomes computerised and the present share certificate system abandoned.