JOHANNESBURG – The JSE Securities Exchange South Africa (JSE) and the London Stock Exchange (LSE) on Monday announced they have signed a Heads of Terms, representing a new development between two international exchanges.
The deal comprises the provision of core technology services by the LSE to the JSE and aims to achieve easier access to each other’s markets for both member firms and issuers.
The completion of the final agreements, which is expected within six to eight weeks, will be subject to the obtaining of all necessary regulatory approvals.
The JSE and LSE said they have signed a “commercial deal” that will see the two exchanges co-operate in four key areas: technology, listing, membership and information dissemination.
On the technology side, the JSE’s Johannesburg Equities Trading (JET) system will be replaced by the LSE’s Sequence system (SETS), which will mean that the JSE’s trading platform will be remotely run out of the UK.
JSE executive president Russell Loubser said the JSE had to replace JET, which had been implemented in June 1996.
The LSE will provide the JSE with a customized, complete and fully functional trading and information dissemination solution, which will enable the trade in all counters.
JSE will continue its surveillance and business support function with its electronic settlement system STRATE as well as remaining legacy systems continuing to run.
The delivery of the LSE’s SET system is scheduled for the end of 2001 with the term of the deal set to run for five years.
The LSE and the JSE said they were exploring ways of simplifying the means by which the UK and South African issues access the respective London and Johannesburg markets.
On the issue of listings, the JSE and the LSE will create an international board that will list counters that fulfil the requirements of both the LSE and the UK regulatory body the FSA.companies on the international board will be ‘dual primary listed’ on both the LSE and the JSE.
The international board will consist of 40 to 60 South African stocks and 184 UK stocks.
In South Africa the 184 UK stocks will be quoted in rands while in the UK the 40 to 60 South African counters will be quoted in sterling.
Loubser said the listings tie up with the LSE would prevent further large South African companies from moving their primary listing away from the JSE to the LSE.
The membership deal sees members of the JSE authorized to remotely trade on the LSE in addition to any trading entitlement that they have on the JSE.
In turn, members of the LSE will get the authorization to be remote JSE participants.
However, only JSE and LSE members who comply with the criteria determined by the LSE and the JSE will be accepted as remote participants.
The deal also sees the JSE marketing LSE information in Africa subject to an LSE contract and in turn the LSE will market JSE information in the rest of the world subject to a JSE contract.
Loubser said the JSE had been working the terms of the agreement announced on Monday for four months.
He said that the alliance would result in a larger pool of liquidity for the JSE.
Loubser said the key issues that remained were” indices, South African exchange controls, regulatory support and market support.
JSE listed counters won’t be listed on the benchmark FTSE 100 index for themoment.”
“The JSE will maintain its indices and London will maintain theirs.
In the future the JSE is entitled to revamp its indices to exclude the new stocks that come to the exchange,” he said.”
“We have been speaking to the South African Finance Ministry and the South African Reserve Bank’s (SARB’s) exchange rate control department.
The deal has the full support of the JSE board and the JSE’s members and other market participants,” he added.
He said that the benefit of the deal was that the JSE would have access to the LSE’s robust trading system.
The JSE would also increase its revenue potential from data distribution and be able to retain its major listed firms.
The benefits for the LSE are that it would be able to diversify its portfolio of products.
The LSE is also expected to generate 11 million sterling extra revenue from the deal over five years.
Clara Furse, CE of the LSE, said the JSE/LSE tie up was the first of its kind for the LSE.
Loubser said the agreement was the first step in the relationship between the JSE and LSE. (8.04 rand–U.S. $1) – Nampa-Sapa-INet-Bridge