The main focus of this thesis is to examine (from an empirical perspective) the role of the JSE in the globalization process, with specific emphasis on the implementation of the Johannesburg Equities Trading6 system and the Share Transactions Totally Electronic7 system. My mini-dissertation examines the role of the JSE in the globalization process, with particular emphasis on the implementation of the JET9 system and the STRATE10 system.
THE ROLE OF THE JSE IN THE SOUTH AFRICAN ECONOMY
Emerging markets attract foreign investors and the number of organizations listed on emerging markets exchanges is growing steadily. For this reason, the JSE can play a vital role in attracting overseas investors, which will inevitably help boost the South African economy.
THE mSTORY AND ORIGIN OF THE JSE
The JSE moved to Hollard Street when the Stock Exchange Committee banned its members from trading on the street. The rules and regulations of the JSE followed those of the London Stock Exchange, modified to suit the local situation.
PART TWO
- THE STOCK EXCHANGES CONTROL ACT 27
- THE GUARANTEE FUND
- LISTING REQUIREMENTS OF THE JSE
- JSE AS THE REGIONAL STOCK MARKET IN AFRICA
There were several amendments30 to the 1947 Act and currently the Stock Exchanges Control Act 1 of 1985 is the statutory authority in respect of the JSE. Currently, the JSE has three listing categories32 based on international standards, namely; the main board, the development capital market and the venture capital market. Furthermore, it gives the JSE's rules and directives the force of law and helps promote fair trading and sound business practices.
The JSE had to get rid of its 'club' image where only the age-old stalwart companies dominated the stock market scene and therefore the venture capital market and development capital market catered for new ones. 34 Of the 18 Stock Exchanges on the African continent, the JSE with its market capitalization of R1209 billion35 is 15 times more than the Moroccan Stock Exchange which is the second largest stock exchange in Africa. According to Darrell Till, who is currently the director of marketing, research and development at the JSE, regionalization is the only way for the stock market to remain competitive and the JSE is the only exchange on the continent that is able to support the process of regionalisation. to float.
Fourthly the JSE has offered the use of its trading and supervisory systems under STRATE to other exchanges in SADC at reduced rates in its efforts to strengthen the harmonization of African exchanges as part of the JSE's role in the globalization process.
PART THREE 1 THE JET SYSTEM
COMPONENTS OF THE JET SYSTEM
Investors and stockbrokers find the new facility particularly useful in terms of real-time market data and graphical displays that help to get a feel for the stock market. The best price of the day is listed on a first-come, first-served basis. The JET system accommodates the small investor to trade odd lots at minimal cost through a specialist and the sale is made at the future bid price after the odd lot order is entered into the JET system Another order book takes care of the others.
It is obvious that the JET55 system is welcome and one of the main advantages of the system is that it is fair and allows the small broker to trade without being pushed around like everything by the bigger brokerage firms. With the introduction of dual capacity, where a broker can play the role of principal and agent, and the emergence of negotiated commissions, larger brokerage firms are in a better position to attract more clients than smaller brokerage firms. The abolition of fixed commissions, the uniform capacity of56 deposits and the replacement of floor trading with electronic trading systems indicate the lSE's efforts to make stock markets more competitive and accessible to a greater number of market participants.
From my info~al discussion with stockbrokers at Merrill& Lynch Investee Securities, they expressed their delight at the electronic trading system, which significantly increased liquidity levels and trading volumes.
STRATE 57
- OVERVIEW
- STRUCTURE OF STRATE
- THE CENTRAL SECURITIES DEPOSITORY PARTICIPANTS 67
- DEMATERIALlZATION
- LIABILITY IN THE PROCESS OF DEMATERIALIZATION OF SHARE CERTIFICATES
One of the major problems in the past was the clearing and settlement houses, which had a backlog due to the large volume of trading. This is one of the fundamental changes that ensures the JSE's entry into the global arena and puts it in line with other major stock markets in the world. Given that the main problem with share certificates is theft and fraud, it would be in the investor's interest to dematerialize their shares, as this reduces the risk.
A huge problem associated with the dematerialization process is the possibility of theft of old share certificates or the likelihood of a large number of frauds. There appears to be some concern about this provision, as the legal nature of entering a name in the SVOP sub-register is not covered by this position. This provision covers the 'transfer' of uncertificated securities and since the entry of a name in the sub-register is essentially a.
Vermaas73 in her article on liability in the process of dematerializing share certificates points out that it seems fair that as in Australian law74, the party canceling it.
TAINTED SCRIP 76
DISPOSSESSED MEMBERS' FUND
It will be at the discretion of the members to pass the cost on to the buyer.' 83. Membership of the JSE is governed by the Rules and Regulations of the Exchange and the Stock Exchanges Control Act 1 of 1985 as amended. The remaining assets of the Expropriated Members' Fund will be returned to the original contributors.
I therefore submit that shareholders should not contribute to the Dispossessed Members' Fund, as this would be a travesty of fairness. On the basis of an application to the Fund, the claimant signs an agreement granting the Fund access to all information (regardless of whether it is held by the issuer or any other party) regarding the lost. Discretion regarding the compensation of disqualified members is exercised on behalf of the Fund by an independent panel of arbitrators appointed by the trustees.
The quantum will be calculated in terms of market value of shares on the date of settlement and if compensation is in kind, the claimant will receive securities equivalent to the securities issued on the date of settlement of the claim.
A SYNOPSIS OF CONTROLLED 88 AND NON - CONTROLLED 89 CLIENTS UNDER STRATE
- CONTROLLED CLIENTS
- ADVANTAGES OF BEING A CONTROLLED CLIENT
- DISADVANTAGES OF BEING A CONTROLLED CLIENT
- NON - CONTROLL~D 98 CLIENTS
- ADVANTAGES OF BEING A NON - CONTROLLED CLIENT
- DISADVANTAGES
The broker becomes the official registered owner of the shares and the names of the registered members will appear in the electronic sub-registry96 of the CSDP. A controlled client can either give the broker the mandate to act on its behalf specifically in relation to making corporate action decisions on behalf of the client or not give the broker any mandate at all. In this case, the broker will contact the customer and ask for a decision from the customer.
There are inherent disadvantages of an open mandate97 as the broker would in this case represent the client. The Expropriated Members' Fund does not offer the client any legal recourse against the broker for bad advice or bad corporate decision-making. The former also did not grant any mandate to the nominated company to the broker to transfer shares.
99 The client is not in a position to negotiate better rates from its SDB incapacity as a single shareholder.
PLEDGING OF SHARES IN STRATE
SVOP would be required to mark the shares as 'pledged' and provide a guarantee that the pledges will not be destroyed without the permission of the pledge holder. The assignee is burdened with the task of requesting this type of commitment from the relevant SVOP. In the case of share certificates that are not dematerialized, the assignee must retain possession of the pledged shares in order to exercise its right as a pledgee in the event that the assignor defaults on its loan or debt obligations.
Where uncertified securities are designated by a member on behalf of a client in a nominee register, the client may be required to file a lien with the member in the form prescribed by the committee as minimum cover. It is interesting to note that the CSDPs are all financial institutions and pledging collateral for loan facilities would be quite simple. Financial institutions are involved in the electronic clearing and settlement process to accelerate the process of clearing and settlement of stock transactions and improve the accessibility of commitments through uncertified securities to increase credit facilities and liquidity levels.
All stock transactions are now inextricably linked to the SEDPs which are currently financial institutions.
STRATE - RELATED COSTS
It is hoped that all players, especially the JSE, STRATE Ltd, the CSDPs and the members of the JSE (brokers), will try to absorb the bulk of the unavoidable costs and not pass these costs on to the investor . It is in this regard that the JSE must take the lead and find ways to reduce the costs of the skeptical system. Such an initiative by the JSE would enhance the role of the JSE in the globalization process.
I believe that phase 2 will only really be realized with the financial help from the JSE, which is much needed to strengthen the process forward. This problem of STRATE-related costs is easily solved, since all the actors in the equation have the capacity and power to absorb costs. With the introduction of negotiated commissions, the broker can reduce rates and the CSDPs, which are essentially the banks, can offer discounts to customers who bank with them.
It is important that all these actors in the equation see the bigger picture and not try to make a killing overnight, as this would paralyze the globalization process.
CONCLUSION
However, the e-settlement process needs to be accelerated and the JSE needs to take ownership and responsibility for this process and help bring the system to its successful conclusion. To expect a shareholder to contribute to a dispossessed members' fund would be a travesty of justice and the right of controlled parties to information about the issuer should be examined. The transfer secretaries must start preparing their registers for dematerialization of share coupons, and the law should review the need to allow shareholders to rematerialize share coupons after holding dematerialized share certificates.
Tom Feys 110in his article 'The context o/Globalization' argues that international investors are only interested in their own profits and not in the well-being of a country's citizens and the fact of the matter is that globalization has its winners and its losers. . There appears to be some merit in this argument and the JSE should take note of this event. In order for the JSE to attract foreign investment, it must first pay attention to attracting local investors. South Africa's wealth is its people and their inherent potential to transform our economy into a global one.
FeysT 'Labour Standards in Southern Africa in the Context of Globalisation: The Need for a Common Approach' (1999) 20IV 1445.
