JSE doesn’t pro­tect long-term in­vestors

Finweek English Edition - - Letters - DE­WALD DE LANGE Via email

THE JSE’S MAN­AGE­MENT shows a lack of lead­er­ship when it comes to pro­tect­ing long-term in­vestors. Since the JSE gen­er­ates its in­come from each trade, the more volatile the mar­ket, the greater their in­come. That cre­ates a con­flict of in­ter­est.

Short sell­ers con­trib­ute to the fall of the mar­ket. There’s a fun­da­men­tal dif­fer­ence in mo­ti­va­tion be­tween share­hold­ers who sell and short sell­ers. The lat­ter want to push the share price down: the more panic sell­ing they can cause, the bet­ter. The ad­di­tional sell­ing makes it more likely that hold­ers of de­riv­a­tive prod­ucts, such as CFDs, are forced to close out their po­si­tions. They’re forced to sell into a mar­ket with few buy­ers.

The pri­mary role of a stock mar­ket is to ob­tain long-term cap­i­tal and it shouldn’t be dom­i­nated by short-term spec­u­la­tors.

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