On 17 May 1792, a group of 24 gentlemen met in the shade of a Buttonwood Tree in New York’s Wall Street and came to an agreement to create a market where the primary commodities of the day, things like grains and skins, could be traded. The Buttonwood Agreement cut out the auctioneers who’d monopolised transactions up until then and it formed the basis of what we today know as the New York Stock Exchange.
It's a place where buyers and sellers could meet, establish a price for their product and have the very best chance of receiving payment.
Stock markets have evolved dramatically since those days. Billions of stock market transactions happen across multiple asset classes in nanoseconds daily - thanks to faster and faster computers and the high-speed lines that today provide the conduits for trade.
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Imagine you have 1,000 shares in Steinhoff that you want to sell at 200c, you may struggle today to find a buyer. Pop them on the market for 150c, and you will probably move them in a moment and have your money, less fees and commissions, within three days of the transaction.
It’s slick and seamless and a far cry from the heady days of the JSE floor, where brokers would bark their orders at a man scribbling prices onto a chalk board, swapping bits of paper as proof of the transaction having been executed.
So why did Sygnia CEO Magda Wierzycka challenge the exchange and its policies at this week's JSE annual general meeting?
Her motivation is simple. In recent years, the JSE has allowed the listings of companies it patently should not have included on its boards.
Bruce Whitfield is an award-winning multi-platform financial journalist and broadcaster.
Most recently Independent chairman Iqbal Surve tried to list self-styled “African Unicorn” Sagarmartha on the JSE. Whether it could have raised the capital it wanted will forever remain a mystery as the JSE ordered a postponement of the listing on a technicality - whereupon the company withdrew its plans.
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The JSE has allowed firms like the Gupta-linked Oakbay to list and has been largely silent on issues raised by the collapse in the value of Steinhoff, African Bank and others.
The JSE’s position is pretty clear: You pay your money and you take your chances.
That’s cold comfort for investors who might believe the JSE is able to police the integrity of the companies and other instruments on its markets.
Bad listings are particularly bad for index investors. Shares are included in an index primarily on market value. The Top 40 for example is an index made up of 40 most valuable companies on the JSE. Steinhoff crashed off that list this year as its share price collapsed 98% from its stratospheric heights.
Steinhoff has been a bone of contention for many investors who are perturbed as to why the furniture retailer had not been suspended from trade. The JSE has been clear on this, the market is a place for price discovery, and freezing investments in the company both for buyers and sellers is prejudicial. If it suspended trade, investors who wanted to get out at 150c/share would be able to do so.
The JSE does have a level of responsibility to investors. It operates in terms of the Financial Markets Act and cannot - as JSE Limited CEO Nicky Newton King put it - “veto listings” just because they don’t like the CEO’s face.
There are many other organs that need to do their jobs to ensure investors are not caught out. Fraud, as in the case of Steinhoff, needs to be investigated by the Hawks and auditors need credibility to provide direction for both management and shareholders.
Wierczyka is critical of the JSE process, and says it does not do enough to combat insider trading and offers no protection in the case of disaster.
JSE Limited CEO Nicky Newton-King acknowledged at the AGM that it was considering some tougher measures to weed out corrupt listings, but seemed eager to shift responsibility for oversight to activist investors.
It seems likely that this is the start of a fight rather than its conclusion.
Bruce Whitfield is an award-winning multi-platform finncial journalist and broadcaster.