Media Release – ZAR X
For immediate release 25 May 2017
ZAR X, South Africa’s first additional stock exchange in almost 60 years, has signed up four new brokers - with another five preparing to join in the next few weeks.
The new signings will bring to ten the number of brokers participating in the ZAR X market. Those already participating include Afrifocus Securities, Anchor Securities Stockbrokers, Independent Securities, Saxo Capital Markets and Senwes.
“We are processing a significant number of applications from additional brokers,” says ZAR X co-founder and director Geoff Cook. “Whilst some are large institutional brokers the majority are medium to small brokers that are attracted by the inclusiveness of our exchange model.
“The current South African broker environment is proving very difficult to all but the largest brokers that use their balance sheet or have a high percentage of discretionary clients. Competition is important and, therefore, financial inclusion along with the economic transformation it should enable. We’ve proactively set out to make it profitable for smaller brokers to operate.”
The ZAR X model slashes brokers’ capital and operating costs. They can execute high volume / high value and low volume / low value transactions with equal ease and profitably.
ZAR X operates a world-leading T+0 pre-funded clearing and settlement model where trades settle in 10 seconds. Brokers don’t need capital adequacy to cover settlement risk and there is no need for an extended back-office or a specialist Settlements Officer. The exchange provides free live data and Avvento front-end and ZBOS client administration applications at minimal cost. It has low cost connectivity options. Clients hold their own segregated depository account (SDA) with STRATE and their own money account with ZAR X nominees. So there are no safe custody fees. And ZAR X sets execution fees.
ZAR X is very pointedly set up as an investors market, with the objective of giving ordinary South Africans an opportunity to benefit from and contribute to business growth. The exchange is also focused on opening up a hitherto untapped South African retail market. It enables investors to buy shares with a minimum of R1 000 and with little to no administration.
“What we’re doing has the effect of creating new revenue streams for brokers, because we’re broadening the investor base,” Cook says.
“At the same time, we’re levelling the broker playing field. We’re removing what we believe to be the unfair advantages large brokers have. Their deeper pockets can more easily accommodate the pressure from institutional investors to reduce the transaction costs of high volume / high value trades. We’re making it possible for brokers to profitably do low volume / low value trades.
“Large brokers also tend to have technology that enables them to obviate latency and, thereby, transact at higher speeds to the detriment of the small firms. Our high performance platform negates that advantage.
ZAR X is to announce a series of new listings in the next several weeks. The market cap of the new issuers ranges from R300 million to R5 billion. The industries represented include agriculture, financial services, health and investment entities.
“Our forthcoming listings are entirely new investment opportunities in the South African market,” Cook says. “They represent earning potential for brokers that simply hasn’t existed before.
“So, brokers are recognising that our model changes the financial markets irrevocably for the better and are keen to contribute to the disruption.”