Belinda Anderson
South African shareholders should certainly be putting their hands together for the Johannesburg Stock Exchange (JSE) securities exchange in its tie-up with the London Stock Exchange (LSE). The deal will give local investors access to some LSE stocks, while some of the most liquid JSE counters will appear on the trading screens of LSE members.
The JSE’s existing trading system, known as JET, which it adopted in 1996 and acknowledges is old, is being dumped. All of its trading will now take place on the LSE’s more advanced system run remotely from London.
Apart from any of the other benefits of the deal, the LSE will get revenue of 11-million over five years. In other words, that is what it is going to cost the JSE. But JSE president Russell Loubser says the benefits far outweigh the costs. “We can’t afford not to do the deal.” Loubser’s starting premise for the deal is that the status quo cannot be maintained. “We believe the JSE must offer more than is currently offered. We must shape our own future … we have to become operationally excellent,” he says.
Extra product offerings as well as the ability to draw more revenue from selling share price information and promoting each other’s markets are on the cards. Part of the plan is also to be the gateway for other African markets into the global arena.
But perhaps the most exciting part of the deal for investors is the local access to London companies. Although this does not change the limit that one can put offshore exchange controls remain at R750 000 a person it will give investors easy access to European companies listed there through their local broker. And it removes the imperative for South African companies to seek a primary listing elsewhere. Those that make the cut to appear on the London exchange and vice versa, will automatically have a dual JSE-LSE primary listing.
But that doesn’t mean that the stocks would automatically qualify to form part of the others’ indices, such as the FTSE 100. The implications around the indices are still being discussed.
The stocks that qualify will be decided by a strict set of criteria to be agreed by both exchanges and regulatory bodies. The JSE expects that between 40 and 60 South African shares will qualify and about 184 United Kingdom shares will be included for trade locally.
The form that the deal has taken is a unique one for the LSE and one that it plans to replicate with other exchanges. LSE CEO Clara Furse says: “This is a first-of-a-kind deal for the LSE and it is on this basis that we hope to make more in future.”