For capital markets managers – how the JSE gets its revenues

For full details, the interim results for the first half year to June 2010 are published on the JSE website. A recent JSE press release summarizes the Group’s revenue for the period as coming from the following:
• Listings – 6 new company listings occurred during first half of 2010 – 5 on the main board (including Wilderness Safaris on the Africa Board) and 1 on AltX – compared with 4 in H1 2009. Revenue in the JSE’s Issuer Services division, which handles new listings, increased 17.5% (H1 2010: R45.8 mln, up from H1 2009: R39.0 mln).
• Spot Equities market – The number of spot equities market transactions rose 22.4% (H1 2010:12.2 mln transactions, up from 10.0 mln in H1 2009), generating revenue of R164.8 mln (up 13.5% on H1 2009: R145.3 mln). Marketing initiatives include: i) A new billing model introduced in March 2010 to reduce total trading costs, encourage high-frequency trading and reward high-volume participants. Trade volumes have increased since. ii) The exchange added an anonymous trading facility which allows for the execution of large trades through hidden order functionality in the central order book. iii) The JSE continued to pursue its strategy of increasing the financial knowledge of South Africans in order to increase the number of retail investors and add to trade volumes. iv) New product innovation continued, including a new range of commodity warrants and collective investment products including exchange traded funds.
• Equity derivatives market – contracts traded rose by 6% to 84.2 mln (H1 2009: 79.4 mln), with the biggest increases from international derivatives, and value traded rose 26.2%. However revenues fell slightly by 0.7% to R53.3 mln (H1 2009: R53.7 mln) mainly owing to two shifts in the product mix: i) a move from options to futures and ii) a drop in the value of Can Do derivatives traded during H1 2010 compared with the previous period. The JSE adopted a “maker-taker model” for its equity derivative market effective 6 July 2010 to bring greater liquidity and encourage greater activity and transparency and says it is noticing increased use of the upgraded derivatives engine following the introduction of the new pricing.
• Commodity market – derivatives contracts traded increased by 12.1% (H1 2010: 1.01 miln, up from 902,370 in H1 2009). Commodity options accounted for most of this growth, owing to volatility in agricultural prices at the start of 2010. This shift in product mix impacted favourably on revenues which rose 15.7% to R20.6 mln (H1 2009: R17.8 mln) during the period.
• The Interest Rate market generated trade reporting revenue of R16.4 mln. Reported cash volumes in H1 2010 climbed to R7.33 trillion (H1 2009: R6.88 trillion).
• Revenue generated by the Information Products Sales division, which is focusing on new and existing offshore clients in a tough market following the downsizing of several global institutions, climbed 6.5% to R58.7 mln (H1 2009: R55.1 mln). Marketing efforts are currently focused on the FTSE/JSE Equally-Weighted Top40 Index, launched during the period. There was a fall in the number of live terminals issued to corporate clients in 2009, but this has now stabilised.

The following table is compiled by
R million % of total
Issuer services (listings) 45.8
Equities (spot) trading 164.8

Equity division total 394.7 63.3%
Equity derivatives 58.3 9.4%
Commodity market derivatives 20.6 3.3%
Interest rate 16.4 2.6%
Information Products Sales 58.7 9.4%
Other 74.6 12.0%
Total 623.3

Equity division includes equity trading fees, risk management, clearing and settlement, membership, issuer services and technology (BDA).

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