The implementation of financial market policy through legislation must constantly evolve to satisfy investors and regulators alike


The role of interpreting the impacts of proposed legislation and regulation at the JSE falls to Anne Clayton, Head of Public Policy. She explains that the JSE is the nucleus around which SA capital markets operate – bearing in mind, however, that this is only one aspect of the entire financial services industry.

‘South Africa competes globally for investment attention and it is accordingly important that we operate markets that issuers and investors trust, both for their regulatory competence and for their operational robustness,’ says Clayton.

‘Effective regulation, therefore, is a crucial element for instilling confidence in the functioning of a stock exchange as well as the broader financial markets system.

‘To achieve this, the manner in which financial markets are regulated must constantly evolve, and the JSE has to ensure that it keeps abreast of how new developments, both in South Africa and foreign jurisdictions, will affect it and its clients.’

The JSE’s Public Policy department does this by constantly scanning the regulatory horizon to identify legislative and regulatory changes that may have a direct impact on the bourse, and it focuses on actively influencing and shaping the implementation of policy that affects the efficiency and integrity of the markets that the JSE operates, the fair treatment and protection of investors, and the competitiveness and attractiveness of SA as an investment destination.

The JSE also engages regularly in robust consultation with government departments and regulatory authorities on draft legislation and regulation, and has made numerous submissions to parliamentary committees.

‘Our advocacy responses to international policy-makers, standard setters and regulatory authorities regarding policy or regulatory issues are co-ordinated through the World Federation of Exchanges, of which the JSE is a member,’ according to Clayton.

She explains that in SA, the Financial Sector Regulation Bill, aka the Twin Peaks Bill, is the most significant regulatory reform of the financial sector in the past 25 years. ‘The Twin Peaks Bill signals the beginning of a deluge of draft legislation and regulation that will have a major impact on the financial services ecosystem.

‘The establishment of the new framework will result in increased regulatory levies and fees, and the JSE has raised concerns about the cumulative effect that such increased regulatory levies and fees will have on market participants, investors and financial consumers. We are also concerned about the impact this could have on the attractiveness of South Africa as an investment destination.’

With JSE trades equating to some R22 billion daily on the equity market, ranking it among the top 20 exchanges in the world, and foreign activity on the JSE equity market averaging approximately 20% to 25% of total trade every day, the impacts could be significant and have unintended consequences. There is also a further issue in that international regulation also comes into play such as the EU Markets and Financial Instruments Regulation (MiFIR) and its related directive (MiFID II). These basically translate into EU investment firms only permitted to trade shares on an EU-regulated market or trading venue, with the JSE currently being assessed as an equivalent regulated market.

‘The JSE is undertaking a review of MiFIR and MiFID II in the meantime, to determine measures the JSE should introduce to ensure the continued attractiveness of the JSE to EU investment firms and enable those EU firms to comply with their regulatory obligations for all securities traded on markets operated by the JSE,’ says Clayton.

By Kerry Dimmer
Image: Gallo/Gettyimages