The JSE launched the All Share Index Mini (Almi) at the beginning of June with much pomp and ceremony. At first interest and transactions exceeded expectations. But transactions have dried up — and it’s all because of an accounting problem.
The issue, says Allan Thomson, director of trading at the JSE, is that the accounting package which the JSE provides to its member brokers has fixed costs that are incurred when a trade is completed: an electronic journal entry is made and there is a fixed cost for this. It is one of the ways in which the JSE recoups some of its overheads.
This fixed cost was fairly insignificant when members were trading in high-value equities and in big lots. What wasn’t foreseen was the relatively high cost of a transaction for a relatively cheaper product: the Almi contract is one-tenth the value of the All Share Index (Alsi) contract and the cost percentage was too high for brokers and their clients.
Thomson says that the issue presented itself only recently and has not been resolved yet. He concedes, however, that it is the main reason that uptake of the offering has tapered off.
The solution, it appears, is a more complicated matter than simply adjusting the fixed cost of the transaction in the computer program. It relates to cash flows for members and the margin that they expect to make from a transaction on their clients’ behalf.
Almi is aimed at individual investors looking for Alsi top 40 exposure at a tenth the cost of the Alsi. Thomson says that Almi is aimed at making the Alsi top 40 more accessible to individual investors.
The product came to market because the Alsi contract became too expensive for the average JSE investor. On July 1 an Alsi contract would cost more than R29 900.
The Almi’s “tick size” — the smallest increment by which it can change — is 10 cents per point per contract. There is a futures option available and investors can access the contract via their stockbrokers, as with any other listed stock.
An investor can hold any number of contracts and, while the Almi is not aimed at institutional investors, they too can get involved.