In a move that will position South Africa's Capital Markets amongst the most sophisticated in global Capital Markets, the JSE, together with National Treasury (NT) and a multi-stakeholder group consisting of Strate, the Financial Sector Conduct Authority (FSCA) and the banking institutions servicing primary dealers, officially launched the electronic trading platform (ETP) for government bonds at the JSE today.
The pilot launch of the platform went live on former president Nelson Mandela's birthday on 18 July 2018, with the full spectrum of bonds being phased in and all nine Primary Dealers having commenced trading on the platform on 22 August.
The new platform provides the benefits of a world-class operating environment, transparency, price discovery and settlement assurance to allow issuers to transact anonymously both pre-trade and post-trade, the end result of which will be lower transaction costs and more price discovery, allowing traders to see live pricing.
Donna Nemer, Director of Capital Markets at the JSE says, "The launch of the ETP for government bonds will undoubtedly position South Africa's capital market infrastructure amongst the most sophisticated in global Capital Markets. A more sophisticated market infrastructure benefits issuers, investors and further positions South Africa as an attractive investment destination. The launch of the Bond ETP was also an important element of South Africa's commitment to Capital Markets reform at the G-20 group of nations. The culmination of the intensive efforts of a multitude of stakeholders including our technology provider MTS; our nine Primary Dealers, the World Bank as project consultant; the South African Reserve Bank; and Central Securities Depository Participants (CSDPs) has really paid off and this is a proud moment for our country."
More than R2 trillion in government bonds is currently listed on the JSE's Debt Board and these instruments account for over 90% of all debt market liquidity reported to the JSE. Government entities issue bonds and list them on the JSE to raise funds for large infrastructure projects such as roads, power stations and hospitals. Investors lend money to these entities by buying the bonds. Investors buy these bonds in order to earn regular interest payments and receive the money they have lent back after a predetermined period.
"It has been a long seven years from the time when the electronic trading platform was conceptualised. Its launch today is a testament to what can be achieved when government and the private sector work together to achieve a common purpose," said Mr Mondli Gungubele, Deputy Minister of Finance. Mr Gungubele added: "The use of electronic trading platforms has shown notable positive effects in the secondary markets including: improved liquidity through price discovery; reduced transaction costs and greater competition; increased transparency, and lower trading costs.
