South Africa's settlement market is set to be disrupted following the issue of a Financial Market Infrastructure licence to Granite.
The licence issued by the Financial Services Board (FSB) is the first of its kind under the Financial Markets Act of 2012 and will provide competition to Strate Central Securities Depository (CSD).
Strate currently is the only operator in South Africa to provide electronic settlement of equities and bonds transactions concluded on the Johannesburg Stock Exchange (JSE). It also settles transactions in money market securities.
Granite CSD, which launched Thursday, will initially settle debt securities with a focus on the bond market.
It plans to commence operations in early 2016, and will move into the money market later down the line.
“In the very near to medium future we will look to expand our product range to collateral management and equities,” said Leon Rossouw, founder and CEO of Granite.
The CEO also expressed the company’s interest in expanding further into other African countries.
The securities settlement service in a statement said that it saw the need to introduce competition to offer the debt market “a streamlined efficient and cost effective service with shorter settlement intervals and a stronger focus on innovation and settlement risk reduction”.
Rossouw told CNBC Africa, “we are of the opinion that if you introduce competition to the market, you clearly are keeping the opposition on their toes.”
The alternative securities settlement service comes at a time when at least three companies have applied to the FSB for stock exchange licences to compete with Africa’s largest bourse – the JSE.
The three are: 4 Africa Exchange (4AX), formed by a consortium of stakeholders including Bravura Capital and agricultural business NWK; ZAR X established by Etienne Nel, who headed Equity Express, which provided trading technology for over the counter trading; and A2X headed by Kevin Brady, a former stockbroker.