Financial services company ZAR X has been granted a stock exchange licence by the Financial Services Board (FSB), enabling the company to operate a mature, independent stock exchange and provide an alternative to companies that want to list their securities on a licensed exchange.
 
“Investors are able to trade securities across a state-of-the-art technology platform that permits transactions to be executed on a same day settlement of trades,” ZAR X CEO Etienne Nel noted in a statement on Wednesday.

Further, investors would be able to undertake trading through their mobile devices.

The current timeframe for transactions to be executed was five days between matched trade and settlement and clearing into an investor’s account.

The ZAR X model, however, significantly reduced settlement risk, as all transactions were prefunded, while investing was made simpler and more affordable for the public, especially for lower-income groups, Nel said.
 
A key driver was to foster the financial inclusion of lower income South Africans who have largely been excluded and to foster a savings culture, he added.

“The FSB licence ushers in a new era in which the barriers to full economic participation by previously excluded sectors of the population are significantly reduced,” Nel stressed.
 
He further suggested that the emergence of the ZAR X Stock Exchange was “a signal that the rigid structures of the past are being dismantled, helping to clear the way for new entrants to the formal economy, especially black investors and entrepreneurs who are eager to make a bigger contribution to job creation and wealth generation”.

In addition to the time and cost-saving features of the ZAR X Stock Exchange, the company provided free safe custody facilities for investors.

Nel added that the ZAR X had no historical practices and legacy systems that drive up costs and slow down transaction times, explaining that the platform was specifically designed to provide businesses with a flexible, practical, transparent and affordable way to list their shares.

“In particular, the exchange is especially well-positioned to facilitate listings of restricted share schemes, currently trading over the counter (OTC), which the FSB ruled were in contravention of the Financial Markets Act,” he noted.
  
Three ZAR X boards would be available to issuers. These included a main board for company listings, with compliance documentation significantly reduced when compared with the traditional model. This followed a shift from a rules-based to a principles-based dispensation.
 
Additionally, ZAR X provided a “restricted market” board – a formalised version of previous OTC platforms for the trading of broad-based black economic-empowerment shares and other securities that could only be bought and sold within a limited marketplace where issuers required some control over the liquidity in their shares.
 
The company would also provide an investment products market, a platform for the trading of structured products and preference shares.
 
Trading on the ZAR X Stock Exchange was expected to start on September 1.