JSE Battles Market Shrinkage Through Simplified Listing Rules and Lower Fees
The Johannesburg Stock Exchange (JSE) is undertaking a major effort to reverse a long-term trend of shrinking listings and increasing market concentration. A study by the University of Cape Town’s Development Policy Research Unit (DPRU) revealed that 514 companies delisted between 1989 and 2024, leaving the market dominated by a small number of large-cap companies.
To combat this, the JSE has materially simplified its listing requirements and introduced lower fees specifically for mid-capitalisation and smaller companies. Alicia Greenwood, director of post-trade services at the JSE, stated that these changes aim to make the market more attractive to issuers without compromising the quality of listings.
Further efforts include "Operation Phumelela," an initiative involving policymakers and rating agencies designed to enhance the local market's appeal. The exchange is also investing in the modernisation of its clearing and trading systems, beginning with equities and extending to other markets over the next five years.
Financial Sector Conduct Authority (FSCA) commissioner Unathi Kamlana has highlighted that the decline is particularly acute among smaller and less profitable firms. He noted that a low economic growth environment and structural constraints have reduced the appetite for new listings, creating a "crowding out" effect where institutional investors favor larger stocks over smaller ones.
As part of its strategy to reduce costs for issuers, the JSE has proposed removing certain reporting requirements, such as the disclosure of Headline Earnings Per Share (HEPS) and the requirement for trading statements. However, asset manager Allan Gray has warned that removing trading statements could lead to volatile share price swings and unexpected market movements.
