Frustrating JSE system outages ‘dent SA’s credibility’ in the investment community

Traders on the JSE were left frustrated on Wednesday after intermittent system glitches led to the suspension of all trading activity on the local stock exchange for about 30 minutes. 

Further angering traders is that the JSE refused to extend the trading period beyond the 5pm close to help them catch up on the lost time to clear all buying and selling activity on behalf of clients.  

Cassie Treurnicht, a money manager at Cape Town-based Gryphon Asset Management, described the technical difficulties experienced by the JSE before lunchtime on Wednesday as “frustrating”. He left his trading desk and went for a walk at a shopping mall. 

A Johannesburg-based asset manager caught up with his leisure reading and kept glancing at his screen, hoping that normal trading activity would resume. 

The asset managers all agree that system outages at the JSE, which seem to be a regular occurrence, are not a good look for the exchange, which often touts itself as the best and most sophisticated on the African continent.  

“The JSE has massive issues in terms of maintaining their trading systems and it is frustrating. It looks really poor as we are the number one financial hub in Africa,” Treurnicht told Business Maverick.  

At a time when the JSE is facing an exodus of companies on its trading platform (through delistings), it should be putting its best foot forward. After all, the JSE and, by extension, South Africa need to attract local and foreign to help fuel private sector investments and create jobs. 

“It’s not a good look at all,” says the Johannesburg-based analyst, citing another incident in August 2021, in which the JSE faced a five-hour systems outage. 

At the time, the JSE’s systems were unable to cope with large trading volumes stemming from a massive share swap transaction between Naspers and Prosus that delayed the exchange’s opening. 

Read in Daily Maverick: JSE opening delayed by R140bn in trading over Naspers-Prosus share swap

“Another outage negatively impacts our credibility, considering the weeks of Eskom’s load shedding. It entrenches the narrative that South Africa is a horrible place for investments,” says the analyst. 

Wayne McCurrie, a senior portfolio manager at FNB Wealth and Investments and whose investment career dates back to when trades were executed on the trading floor at the JSE’s downtown Joburg headquarters, agrees with the analyst, saying trading outages on the JSE seem to be a common occurrence lately. 

The JSE informed clients at 1.48pm on Wednesday about system problems, saying it was aware of “disconnects” across its platform that made it difficult for traders to execute trades. It apologised for the inconvenience and committed to investigating the source of the problem.   

At 2.30pm, things took a turn for the worse when the JSE suspended all trading activity. Only 30 minutes later, the JSE resumed trading in all instruments such as equities and bonds, and informed its clients about extending the trading period beyond 5pm to make up for the lost time. But the JSE’s advisory committees, by 3.56pm, advised against extending the trading period, saying it was not “necessary at this time” and “therefore normal market operating times will be in effect”.  

So, the JSE closed at 5pm.  

Treurnicht says not extending the trading period would have the effect of forcing traders to clear the buying and selling of investment instruments hurriedly. For example, if a trader were to receive an order for the purchase of shares when the JSE faced an outage, the trader would have to rush the order once the bourse came online. 

“That might cause extreme volatility in the last hour and a half of the market being open. It has the potential of not smoothing things out for the rest of the day. It is not good from a market impact perspective,” says Treurnicht. 

The Johannesburg-based analyst agrees with Treurnicht: “If there is no liquidity available, I need to find ways to process that liquidity or inflow. It might cause prices to increase significantly as there are no options or bids available. Then I need to sell a big chunk in the market.” 

Wednesday’s failure has again prompted calls for more competition in South Africa’s financial markets. But most alternative exchanges, such as A2X and ZAR X, still largely depend on the JSE’s systems. 

For example, brokers depend on the JSE’s technology infrastructure (mainly the JSE Broker Dealer Accounting, or BDA, system) to execute and clear share trades on behalf of clients, and the system acts as a repository of client data (such as share positions).  

Even though A2X has its own post-share trade and clearing system, the JSE still requires brokers to use its BDA system. In other words, brokers depend on the JSE’s system, which creates problems for an alternative exchange such as A2X, even though its systems would be open and ready to process trades. BM