High court appeal over granting ZAR X exchange licence

SECURITIES exchange firm 4 Africa Exchange (4AX) yesterday said that it would approach the high court to appeal against the Financial Services Board (FSB) decision to grant ZAR X an exchange licence.

The 4AX bid for courts comes just hours after ZAR began operating as the country’s second stock exchange, with agriculture group Senwens and its holding company Senwesbel being the first to list.

Drew ire

The FSB granted ZAR X the exchange licence last year after it had found that its application complied with the relevant requirements of the Financial Markets Act.

The decision drew the ire of 4AX, who together with the JSE took the matter up with the FSB Appeals Board.

The JSE also appealed the granting of an exchange licence to 4AX, but dropped the appeal after the two companies agreed to co-operate in the financial markets.

4AX is an aspiring stock exchange that was recently licensed and plans to begin trading next month.

4AX chief executive Fay Mukaddam said after the group decided on the legal route after considering the FSB Appeal Board judgment.

Mukaddam said 4AX remain convinced that the ZAR X model and rules were neither compliant nor in line with the Financial Markets Act, Companies Act or common law.

Public was not notified that ZAR X had substituted its original rules in November 2015.

“Compliance with each of these regulations is self-evidently paramount in awarding an exchange licence,” said Mukaddam.

“We also consider the possibility of systemic risk being introduced into this space, something which could have profound implications for our financial markets, public trust and the reputation and integrity of our markets. This is something we cannot ignore.”

ZAR X director of listings, Graeme Wellsted, said the company would continue to serve its clients and was not perturbed by 4AX’s recent legal challenge.

“The concerns about the process of granting the licence raised again by 4AX and in its previous collaboration with the JSE were considered by the judge of the FSB Appeal Board as being misguided, we believe a similar outcome would prevail,” Wellsted said.

Earlier 4AX argued before the board that the FSB registrar failed to notify the public at large that ZAR X had substituted its original rules in November 2015.

The JSE also charged that the registrar failed to allow it access to ZAR X’s full licence application.

The JSE said as a result, the registrar failed to comply with a necessary requirement for the lawful exercise of his power to grant an exchange licence.

ZAR X countered that both 4AX and JSE had no interest in the matter and the purpose of the appeal was to stifle competition and, for the JSE to retain its monopoly or exclusivity.

JSE director of capital markets Donna Nemer said it would not be appealing the decision and would work with the regulator and all market participants to maintain the high quality of capital markets in the country.