Tuesday, January 18

Frustrated JSE Traders Forced To Take A Walk While The Stock Market Was Paralyzed


Cassie Treurnicht of Gryphon Asset Management caught up on her reading and went for a walk.

Petri Redelinghuys of Herenya Capital Advisors used the time to catch up with clients.

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And MoneywebNOW investor and podcast host Simon Brown kept his eyes on the screens, waiting for trading to resume.

Everyone agrees: the five-and-a-half-hour hiatus on the Johannesburg Stock Exchange (JSE) that prevented them from buying and selling stocks until late Wednesday afternoon was not a good sign for an exchange promoting itself as Top from Africa, in a country that needs to attract foreign investment to help boost growth and reduce unemployment.

Read: JSE share trading to resume after delay caused by record volumes

“You know how bad it makes us see this,” said Treurnicht, who manages funds from Cape Town. “That damages our credibility and just fits in with the rest of the narrative that South Africa is underinvested and neglected. Pathetic.”

The systems of Africa’s oldest and largest exchange were unable to process deals stemming from a massive stock exchange transaction between Naspers Ltd and Prosus NV in time for Wednesday’s opening. The transaction shifted companies’ weights in key indices in South Africa, forcing money managers to adjust their portfolios. The intense trading that followed paralyzed the stock market.

Overload

Exchange operator JSE said Tuesday’s transactions of R145 billion ($ 9.7 billion), more than double the previous high in 2017, caused processing delays in its systems.

He apologized to customers “for the inconvenience caused”, as operations started at 2:30 PM instead of the usual 9:00 AM. JSE CEO Leila Fourie said the exchange is working on “corrective action” to ensure it doesn’t happen again.

While this was a ‘black swan’ event, the JSE received some criticism for outdated systems that may increase the appeal of upstart rivals that have opened up in recent years.

The exchange, one of the 20 largest in the world, has shrunk to 150 publicly traded companies with a combined market capitalization of about $ 111 billion, from 473, and a capitalization of $ 183 billion in 2003.

Source: Bloomberg

Wednesday’s failure has already prompted calls for more competition in South Africa’s financial markets.

There should be a push to give brokers options other than JSE’s ‘Broker Accounting’ system, which was at the center of Wednesday’s glitch, said Kevin Brady, CEO of A2X Markets, an alternative exchange based in Johannesburg. Ironically, he was on vacation when the chaos struck.

“Brokers should have the freedom to choose which systems they want to use for their post-trade, they shouldn’t have to use JSE’s, particularly when they are 35 years old,” Brady said.

“If the system fails, the market is dead. There has to be a drive to unlock that control in the post-negotiation process. ”

Market participants are advised that A2X is not affected by the delay in the start of the JSE stock market, with the A2X market opening as usual at 09:00.

In 2017, the JSE paid customer claims and conducted reviews after technical issues prevented trading of shares and derivatives for one hour and 45 minutes. He has not commented on whether he will do so again.

Impact

“Costs are difficult to quantify because they relate to the opportunity costs of not being able to access the market until much later in the afternoon,” said Doug Blatch, Africa trade director at Ninety One. of underlying clients could not be processed due to insufficient liquidity to complete, which, in turn, may affect other commitments assumed “.

For many traders, this was a particularly bad day for the exchange to crash.

Naspers, the largest shareholder in Tencent Holdings, is often used as a proxy trading when the WeChat operator and China’s largest company publish the results, which happened while JSE was offline on Wednesday.

“There’s really nothing you can do when the JSE goes down,” said Nick Kunze of Sanlam Private Wealth. “Yesterday’s reweighting and Tencent’s results, the timing couldn’t have been worse. But they say it doesn’t rain, it pours “.

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