TRADING ON SUCCESS - JSE MAGAZINE

TRADING ON SUCCESS

The Black Stockbroking Firm Enterprise Development Programme is proving integral to the JSE’s transformation strategy

TRADING ON SUCCESS

The launch last year and continued results of the JSE Black Stockbroking Firm Enterprise Development Programme is an outcome of engagement with the Black Brokers Forum (BBF). A concern of the BBF is how to address the issues and challenges facing black stockbroking firms, as well as finding sustainable solutions to develop such organisations.

This aligns well to the JSE’s transformation strategy, which embraces enterprise development (ED) and also focuses on providing assistance to smaller black-owned entities, enabling them to grow their businesses and play an increasing and more meaningful role in the economy.

Valdene Reddy, Head: Equity and Equity Derivatives, explains that after engaging with the BBF, the bourse established the JSE Black Stockbroking Firm Enterprise Development Programme, which is open to all JSE equity market members’ stockbroking firms on the proviso that they meet certain strategic requirements.

‘Such organisations must satisfy the definition of a black stockbroking firm as defined in the Financial Sector Code – or any successor code. The ED grants awarded must also only be directed at the growth and development of the black brokerage,’ she says. ‘In return, participants are given cash disbursements equal to 33% of their equity trading fees, as well as 33% of their API connectivity fees, which replaces the previous membership fee, on a quarterly “in arrears” basis.’

This, according to Reddy, is a very encouraging benefit for groups that are small in nature and often, due to a lack of financial adequacy, unable to take on more or new business.

The JSE has also provided, within the programme, a further fee waiver. ‘Brokers in this category often don’t have the required technology to execute certain trades for their clients, meaning they have to outsource this service to members that do. In order to ensure that such a transaction is less cumbersome, the JSE no longer charges any fees for give-up trades related to black brokers,’ she says.

‘This ensures that a member is able to trade in a single equity security as a principal with another member who trades either as an agent on behalf of a client, or as a principal for that member’s own account. The give-up trade then enables the member to pass a trade that has been executed by the first member, referred to as the “executing member”, on the same day or the previous day to the second member – “receiving member” – at the price of the original trade. However, the trade that is given to the receiving member must have originally been executed by the executing member with the intention of giving it up to the receiving member.’

Testament to the programme’s success is the return last year of approximately R6 million in grants. All participants, of which there are currently 14, are required to provide feedback to the JSE as to how the grants were utilised in terms of growing their business.

Reddy confirms that the feedback received for 2016 was hugely encouraging. ‘It demonstrates the immense potential of a properly structured programme, especially when the donor is intimately involved with the participants.’

By Kerry Dimmer
Image: iStock