JSE equity market enhancements explained

The Johannesburg Stock Exchange (JSE) has recently implemented a series of equity market enhancements aimed at allowing market participants to buy and sell large blocks of shares and to trade anonymously within the best bid and offer without interference. This move has raised questions about the security features in place to prevent rogue traders from taking advantage of the new system. Donna Nemer, Director of Capital Markets at the JSE, shed light on these developments in a recent interview with CNBC Africa. Nemer highlighted the success of the T plus three system in the South African market, emphasizing that there have been no failed trades or issues since its implementation. She credited the entire market for this achievement, underscoring the collaborative effort involved. The enhancements are part of the Integrated Trading and Clearing (ITAC) project, which includes upgrades to the equity trading engine and the introduction of new order functionality. Nemer explained that the new trading types offer more execution flexibility, particularly for large institutional investors dealing in sizable orders. One of the key features is the central order book cross, where brokers can execute trades within the bid and offer range without external interference. This ensures a transparent and efficient trading process. Additionally, hidden order types like pegged hidden orders and post-closing auctions have been introduced to facilitate large trades and minimize market impact. Nemer emphasized that these new functionalities are designed to cater to the natural liquidity of the market and are unlikely to lead to rogue trading behavior. She reassured that robust surveillance mechanisms are in place to monitor trading activities and maintain market integrity. The JSE's commitment to international standards and best practices has been a driving force behind these enhancements, aligning the South African capital markets with global competitiveness benchmarks. Nemer expressed confidence that the JSE's reputation as a well-regulated exchange will be further enhanced by these initiatives. In tandem with the market developments, the JSE is actively engaging in a roadshow to promote confidence in the South African economy. The 'South Africa Tomorrow' campaign, led by the JSE's CEO and prominent industry figures, aims to showcase the country's investment opportunities and economic potential. Nemer highlighted the positive reception of the roadshow, signaling continued interest in South Africa from investors and stakeholders. As the JSE navigates regulatory challenges, such as the recent decision regarding the review of its operating license, Nemer affirmed the institution's commitment to regulatory compliance and market stability. While acknowledging the outcome of the appeal process, she stated that the JSE would respect the final decision and abide by the regulatory framework. The interview with Donna Nemer provided valuable insights into the strategic initiatives driving the JSE's evolution and its proactive approach to enhancing market efficiency and investor confidence.