A2X marks the spot, grows securities by 67% in 2022
Alternative South African capital market platform A2X Markets (A2X) has grown the number of securities listed on the exchange by 67% in 2022 alone, marking the most listings it has achieved in a single year since it began trading five years ago.
“A2X started the year with 54 listings and added a total of 37 securities with a combined market capitalisation of R800 billion,” the platform’s co-founder and CEO Kevin Brady tells Moneyweb.
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He says A2X’s trading volumes have also grown significantly in 2022, by over 200% year-on-year to the end of November.
With a surge in new listings in the second half of this year, Brady adds that the A2X platform has seen an almost 300% growth rate during this period.
The bourse saw eight new secondary listings in the last quarter of 2022, bringing the total number of instruments listed to 93 with a total combined market capitalisation of R5.3 trillion.
The eight listings in Q4 include:
- Hyprop Investments, listed on 7 December
- Truworths International, listed on 5 December
- Woolworths, listed on 2 December
- Life Healthcare, listed on 1 December
- Attacq, listed on 16 November
- Pick n Pay, listed on 1 November
- Sygnia’s Itrix Sustainable Economy ETF (exchange-traded fund), listed on 24 October; and,
- 1nvest’s 16 ETFs, listed on 5 October
Commenting on the platform’s performance, Brady says: “We are very pleased with how A2X has performed this year as well as from the support from corporate South Africa. We’re at a point where the momentum is strong, and people are understanding the platform’s value proposition.”
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According to A2X, it has grown its trade value to over R26 billion in 2022, compared to R657 million in its first year of trade.
In addition, it now has 17 top 40 constituents listed, with the likes of Remgro, Nedbank, AngloGold, Implats and Discovery listing in 2022.
“Seven property companies are listed, representing over 50% of the property sector as measured by market cap,” the bourse notes.
It says five of the top six brokers in the country, namely Peresec, Rand Merchant Bank, Standard Bank Securities, Absa and Investec, representing 60% of total brokering activity in South Africa, are A2X members and trade on the platform.
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“In addition to the many public companies that are secondary listed on A2X, there is also a growing number of exchange-trade funds [ETFs] listed on A2X as well.”
“Local ETF issuers, including 1nvest, Absa and Sygnia, have opted to secondary list some 34 of their ETFs on A2X because of the benefits it brings for their investors. This represents over 50% of the local ETF markets as measured by market cap,” it adds.
The alternative bourse says it has calculated the potential savings, it makes available to the market, to be around R500 million per year.
It claims that its savings pool, driven by cost-effective trading fees and the ability to capture price improvement, results in the buying and selling of shares at a better price when brokers transact.
“The current savings amount of R500 million is set to increase significantly to potentially R1.5 billion as more public companies decide to secondary list on A2X,” it adds.
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Brady says the platform’s savings offering shows that there are significant opportunities to lower the cost in key parts of the investment value chain.
“These benefits are then delivered to the ordinary person who is seeking to incrementally build their wealth by way of an investment or pension fund product.
“As a significant player in the capital markets, we remain mindful that for most people in South Africa, the only wealth they are likely to accumulate over their lifetimes is in their pension fund,” he adds.
“Therefore, as responsible industry players, we must constantly look at how we lower costs to benefit the end client. Small, incremental cost savings over, say, a 30-year period can add a significant boost to people’s pension funds,’ he points out.
Speaking to Moneyweb, independent analyst at Small Talk Daily Anthony Clark says while A2X’s licence only allows for secondary listings, the alternative bourse offers a host of benefits, such as its low transactional costs which lead to saving money as opposed to transacting on the JSE.
“As a digital platform, the underlying transactional costs are substantially lower than the JSE where everybody bemoans the fact that the monopolistic dinosaur has layers and layers of fees to operate on its platform. A2X is a much simpler situation,” he adds.
According to Clark, the A2X generally prides itself on having a much tighter spread, contrary to the JSE.
“What that means is if you’re an institution dealing in size consistently, that incremental saving that you’re making between buying and selling actually starts to add up alongside the speed of the transaction and the lower costs,” he explains.
He says these factors have led many large companies now having a secondary listing on the A2X.
Clark further notes that the bourse makes its money from the volume flows on its platform.
“So, the more participants it gets on its platform and the more those stocks trade, the more money the A2X exchange makes. But at the end of the day, the underlying participant ends up saving incrementally more money than they would if they did the exact same trade on the JSE.”
However, he says that there is a limiting factor to the platform because it does not have a full suite of brokers like those who ordinarily trade on the JSE.
“It does tend to concentrate the tradability amongst institutions who have a counsel with brokers. But the platform does have major brokers.”
“All in all, the A2X exchange has done quite well so far. I expect it to continue to pick up new listings purely for the tightness of spread, the ease of the digital platform and the swiftness of settlement and trading,” adds Clark.
Talking about the future of the platform, Brady says A2X has its sight set on getting the majority of the top 100 companies to have a secondary listing on the bourse.
He says the exchange intends to get a secondary listing licence with the Cape Town Stock Exchange and hopes to introduce new products to South Africa along with more inward listings from offshore exchanges.
“I understand for many companies that there is a bigger investor base looking for international exchanges. In South Africa, we’ve got the shrinking pot of listings, but we need to find new ways to attract new listings in the country. We need to grow South Africa’s pot in that regard.”
Listen to Brady speaking about the A2X in this special Moneyweb podcast with editor Ryk van Niekerk (or read the transcript):
Nondumiso Lehutso is a Moneyweb intern.