Johannesburg Stock Exchange (JSE): South Africa Stock Market

Considering the Johannesburg Stock Exchange (JSE) for investment? This goes-to source provides you with the essentials on interacting with South Africa’s largest exchange, understanding its market offerings from stocks to derivatives, and recognizing its compounding effect on the national economy.

Table of contents:

Key Takeaways

  • The Johannesburg Stock Exchange (JSE) was established in 1887 and has evolved to become a diverse platform offering a variety of financial products, including equities, bonds, currency instruments, and derivatives.
  • The JSE is significant to South Africa’s economy, serving as a financial hub for capital raising by companies, job creation, and wealth generation, and reflecting a correlation between JSE performance and economic growth.
  • JSE Limited operates the JSE and it’s a publicly-listed company with shares traded on the exchange itself. The JSE listing requirements ensure transparency and governance, while its role in the global market is validated by its membership in the World Federation of Exchanges.

The History and Evolution of the Johannesburg Stock Exchange (JSE)

Illustration of the Johannesburg Stock Exchange during the South African gold rush

Born out of the bustling excitement of the South African gold rush in 1887, the Johannesburg Stock Exchange (JSE) was established by Benjamin Wollan to provide a platform for gold mining companies to raise capital. Originally, the JSE was a member-driven organization that catered primarily to the needs of the booming gold mining sector. However, as the years went by, the JSE underwent significant transformations. It evolved into a privately-owned business and eventually became a publicly listed company, expanding its financial capabilities and services to cater to a broader market.

Today, the JSE stands as a financial powerhouse, providing an array of financial services and significantly influencing South Africa’s economy.

The Market Structure and Asset Classes Offered by JSE

Diverse asset classes offered by JSE

The JSE is not just about equities. It administers five distinct financial markets, making it a diverse platform for a wide array of investments. Whether you’re interested in:

  • shares of companies
  • various types of bonds
  • derivatives
  • foreign exchange products
  • financial, commodity, and interest rate derivatives markets

the JSE has got you covered. It caters to the needs of different investors.

Now, let’s explore the various asset classes that the JSE offers.

Equities

The JSE offers a variety of asset classes for trading, including:

  • Equities, or shares of companies
  • Exchange-Traded Funds (ETFs)
  • Exchange-Traded Products (ETPs)
  • Commodities

These options cater to the diverse needs of investors and provide even more avenues for investment.

Bonds

The JSE’s Bond Market is recognized for its accessibility, cost-effectiveness, transparency, and integrity. It offers a wide variety of bond products, from government to corporate, and even inflation-linked bonds, making it a reliable bond exchange platform.

To boost liquidity and market efficiency, the JSE promotes the participation of new entrants. By investing in bonds on the JSE, investors have the opportunity to lend money and receive regular interest payments, making it an attractive option for income-focused investors.

Currency Instruments

For those intrigued by the foreign exchange market, the JSE provides a range of options. It offers a range of currency instruments, including foreign exchange (FX) products. The JSE’s currency derivatives market was launched in 2007, providing on-exchange trading of currency futures and options, particularly focusing on instruments tracking the rand to major world currencies.

Over the years, the JSE has introduced innovative foreign exchange products, including contracts with custom expiry dates and those tailored to suit specific client requirements, providing traders with more flexibility and control in their own exchange.

Interest Rate Derivatives

Interest Rate Derivatives are another asset class offered by the JSE. These derivatives provide tools for market participants to manage exposure to fluctuations in interest rates, which can be used for hedging or speculation. To manage settlement risk, the JSE requires members to deposit a settlement margin on T+2 for transactions involving interest rate derivatives. This involves mechanisms like mark-to-market revaluation and a value-at-risk (VaR) based calculation.

Trading Platforms and Technology Innovations

Innovative trading technology at JSE

Embracing the digital age, the JSE has made several advancements in its trading platform:

  • In 1996, the JSE upgraded to electronic trading, transitioning into a modern trading platform.
  • In 2023, the JSE launched Colocation 2.0, which improved connectivity and provided firms with both virtual and physical server options.
  • This allows firms to collect live market data and test applications in the JSE environment, further streamlining the trading process.

With its robust infrastructure, the JSE ensures a reliable marketplace for buyers and sellers to exchange financial products. The JSE is also a pioneer in corporate governance, being the first exchange globally to mandate integrated reporting.

The Role of JSE in Connecting Buyers and Sellers

JSE's role in connecting buyers and sellers

At its core, the JSE is a marketplace that connects buyers and sellers. It facilitates the raising of primary capital for listed companies, thereby enhancing job opportunities and wealth creation in South Africa. Whether you’re a large corporation looking to grow or a small, high-potential entity, the JSE has a platform for you. Companies aiming for growth can access the JSE’s Main Board for capital raising, while smaller entities can tap into the AltX, a private market solution offered by the JSE for businesses seeking capital without going public.

Supported by sophisticated trading technology and stringent regulatory supervision, the JSE guarantees a secure marketplace for trading financial products.

Listing Requirements and Market Capitalization

Listing requirements and market capitalization on JSE

To list on the JSE, companies need to fulfill certain requirements. For example, companies seeking to list on the alternative exchange, AltX, must:

  • Engage a registered designated advisor to assist with the listing process and ensure compliance with regulations.
  • Conduct due diligence.
  • Receive advisory on types of listings.
  • Submit an application letter and business plan.
  • Give a presentation to the AltX Advisory Committee.

The listing process involves several steps, and following these requirements is essential for a successful listing.

Once a company is listed on AltX, its directors are required to attend a Directors Induction Programme to understand JSE Listings Requirements, corporate governance, and relevant legislation.

Risk Management and Settlement Assurance

Maintaining a secure and trustworthy trading environment is a top priority for the JSE. To ensure risk management and settlement assurance, the JSE has put in place various measures, including:

  • Strate Limited, the licensed central securities depository for the equities market of the JSE, is responsible for electronic settlement and maintaining an electronic register of dematerialised securities.
  • Transactions are settled on a T+3 basis, ensuring transfer of ownership within three days post-trade.
  • Additional measures include technological solutions, the BDA system, and capital adequacy monitoring.

The JSE also operates a Surveillance division that monitors transactions, applies analytical tools, and collaborates with the Financial Services Board to mitigate market abuse. In case of a member default, the JSE Settlement Authority intervenes to ensure that the settlement of client transactions is completed.

Alternative Exchange and Mid-Sized Listings

The JSE recognizes the importance of supporting smaller, high-growth companies. In 2003, it established the AltX, an alternative exchange, to cater to the capital needs of such companies. To list on the AltX, companies need to evaluate various factors, including:

  • Performance
  • Stage of development
  • Management quality
  • Resource availability
  • Strategies
  • Business prospects

Once listed on AltX, companies gain increased exposure to a large base of investors and opportunities to enhance their profiles and stakeholder relationships.

The JSE’s Global Standing and Membership in the World Federation of Exchanges

The JSE is not just a national star but also a global player. It is one of the top 20 exchanges in the world by market capitalization. Furthermore, the Johannesburg Stock Exchange is a member of the prestigious World Federation of Exchanges, which represents over 250 member organizations, including exchanges and clearinghouses.

With its diverse membership options and access to African assets through advanced technology and a well-regulated framework, the JSE continues to strengthen its global standing.

Data and Market Information Services Offered by the JSE

In today’s digital era, data is key, and the JSE provides a variety of transparent market data products for professionals and data distributors. Throughout the trading day, the JSE generates a range of data across different markets, such as indices, exchange news, and historical and reference data products. This data is delivered through various channels and formats directly from the source, including specific file transfer protocol formats for end-of-day data products.

In addition to equity data, the JSE also offers information on debt instruments, enabling access to bond trading activities. Whether you need live or delayed data, the JSE’s dedicated market data sales and support teams are there to assist.

What is the Johannesburg Stock Exchange (JSE) and its purpose?

The Johannesburg Stock Exchange (JSE) serves as a platform where buyers and sellers trade shares issued by various companies. It operates as an organized market that provides price transparency for all listed shares, allowing investors to determine the value of their share portfolio. Its primary functions are to assist companies in raising capital in the main market and to facilitate the trading of shares and other instruments in the secondary market. By ensuring a regulated environment with rules and guidelines, the JSE increases the safety of public shares compared to unlisted or private ones.

With a history dating back to 1887, the JSE has been a central platform for financial trading in South Africa, serving as the economic engine of the country where companies from various industries raise public capital for expansion, thus creating jobs and new opportunities.

How does the JSE affect South Africa’s economy?

The JSE has a significant impact on South Africa’s economy. Studies indicate a long-term correlation between the performance of the Johannesburg Stock Exchange and South Africa’s economic growth. The direction of causality between the JSE’s performance and the nation’s economic growth is bidirectional, particularly between market capitalization and the JSE All Share Index. This suggests that growth in the stock exchange can influence the economy positively.

However, in the short term, the relationship between economic growth and stock market performance is less clear. The relationship can vary depending on the specific stock market measures or proxies used in the analysis. A well-developed financial system that complements stock market growth could contribute to increased economic growth in South Africa.

What are the top companies listed on the JSE?

Some of the world’s most influential companies are listed on the JSE. BHP Group Limited, a multinational mining, metals, and petroleum company, is one of the top companies listed on the Johannesburg Stock Exchange with a market capitalization of 2.68 trillion ZAR. Anheuser-Busch Inbev, a multinational drink and brewing company, also has a significant presence on the JSE with a market capitalization of 2.03 trillion ZAR.

Other notable companies include:

  • Prosus N.V., a global consumer internet group, with a market capitalization of 1.63 trillion ZAR
  • Glencore plc, a major player in the basic materials sector, with a market capitalization of 1.51 trillion ZAR
  • Compagnie Financiere Richemont, known for its luxury goods, with a market capitalization of 1.42 trillion ZAR.

How do I invest in the Johannesburg Stock Exchange (JSE) as a beginner?

For beginners eager to invest in the JSE, it begins with acquiring a comprehensive knowledge of the exchange’s operations. The JSE’s official website is a good starting point to gather initial knowledge. It’s also advisable to consult with JSE-registered stockbrokers who can assist in identifying suitable investment options and understanding the associated risks and benefits.

As a beginner, it’s important to understand:

  • The different types of shares
  • The concept of derivatives
  • The functions of a share exchange like the JSE
  • Dividends and their distribution
  • Assessing potential returns and a company’s long-term strategy
  • Deciding on your level of direct involvement in investing, whether it’s through active trading or adopting a more passive investment strategy.

What are the risks and rewards of JSE investments?

Investing in the JSE involves both potential risks and rewards. On the positive side, investors can:

  • Leverage the growth potential of the South African economy
  • Diversify their portfolios across various industries
  • Receive dividends from companies
  • Tap into international markets
  • Benefit from the JSE’s high liquidity, which offers investors the flexibility to quickly enter or exit the market
  • Take advantage of the JSE’s emphasis on transparency, which ensures that companies provide regular financial reports for informed investment decisions.

On the flip side, investments in the JSE are subject to:

  • Market volatility
  • Economic, political, or global events
  • Government policy changes
  • Economic downturns
  • Currency fluctuations
  • Currency risk for foreign investors due to fluctuations in the exchange rate between the South African Rand and their home currencies
  • Potential regulatory changes or corporate governance issues in the JSE, which can adversely affect the performance of individual companies and the overall market.

How does the JSE compare to other stock exchanges globally?

Compared to other prominent global stock exchanges, the JSE has experienced its fair share of fluctuations. In 2023, the JSE’s growth was modest at 1.8%, which was lower compared to major global exchanges like:

However, the weakening of the South African rand against the dollar from R17 to R18.30 at the end of 2023 enhanced the returns for South African investors in international markets. Despite the modest growth, certain companies like Gold Fields, one of the top performers in the JSE, saw an increase of nearly 70% in 2023, primarily due to the rise in gold prices and the depreciating rand.

Overall, the JSE continues to hold its place as one of the top 20 largest stock exchanges worldwide and the largest stock exchange in Africa.

What is the role of regulators in the JSE?

Regulation is instrumental in ensuring the JSE maintains a fair and efficient marketplace. The JSE operates within a framework set by the Financial Markets Act of 2012 and must also adhere to its own rules and directives, along with the Financial Intelligence Centre Act of 2001. The JSE’s Market Regulation division is tasked with monitoring trading activities to identify potential market abuses like insider trading, market manipulation, and dissemination of false or misleading information.

Electronic surveillance systems are utilized by the JSE Market Regulation division to monitor and analyze trading, flagging activities that might constitute insider trading or market manipulation. The Financial Sector Conduct Authority (FSCA) is responsible for investigating instances of market abuse identified by the JSE and taking enforcement actions where necessary. The JSE regularly refers cases of suspected market abuse to the FSCA for further investigation and possible enforcement.

How do economic indicators impact Johannesburg Stock Exchange (JSE) performance?

Economic indicators can considerably influence the performance of the JSE. They can influence the performance of sub-indices on the JSE, which may go through cycles of efficiency and inefficiency. The efficiency of the JSE can be altered by the activities of active portfolio managers taking advantage of informational inefficiencies in the market. Smaller and younger indices on the JSE may not always be as efficient as the all-share index, presenting opportunities for excess returns.

The JSE’s overall efficiency can change over time, aligning with the concept of varying market efficiency. Sub-indices on the JSE that consist of smaller or less familiar stocks can display informational inefficiencies due to factors such as limited information availability and market size. The relative predictability of certain JSE sub-indices suggests that active management strategies could potentially yield profits from informational inefficiencies.

What are the basics of stock market trading on the JSE?

Trading on the JSE requires the utilization of both fundamental and technical analysis. Fundamental analysis involves the study of a company’s financials, its competitive position in the market, and the economic environment. Technical analysis, on the other hand, involves the study of share prices, primarily through the use of charts, to predict future price trends.

Technical analysts on the JSE do not focus on supply and demand statistics but instead look at the price, which they believe reflects all fundamental information. The tools used by technical analysts on the JSE include various types of charts like:

  • line charts
  • bar charts
  • candlestick charts
  • point and figure charts

Technical analysts on the JSE use indicators like moving averages, MACD, and RSI on the charts to help determine trading opportunities.

How do I choose which stocks to buy on the JSE?

Investors mainly adopt two approaches to determine which shares to invest in on the JSE. One approach is to use technical analysis, which involves studying past market data, primarily price and volume, to forecast future price movements. This method is based on the belief that history tends to repeat itself and that price movements are trend-following.

The other approach is fundamental analysis, which involves evaluating a company’s intrinsic value by examining related economic, financial, and other qualitative and quantitative factors. This method assumes that the stock’s price does not always reflect its value and that market inefficiencies can create opportunities for profit.

What factors influence JSE stock prices?

Various factors can affect stock prices on the JSE. At the most basic level, stock prices are influenced by the balance of supply and demand, where an increase in demand can raise prices unless matched by supply. Economic factors such as inflation, interest rates, and economic outlook, both locally and internationally, can also affect the demand for shares and consequently their prices. Political developments and government policies within South Africa and in other countries can have a significant impact on share prices across the market.

Trends within specific industries can dictate the performance of shares, with industry growth typically leading to increased demand and higher share prices. Market sentiment, the collective psychology of investors, can strongly influence share prices, sometimes irrespective of fundamental analysis. Lastly, news related to a company, such as earnings updates, new contracts, or product test results, can significantly influence its share price on the JSE.

How do dividends work for JSE-listed companies?

Dividends, which JSE-listed companies may opt to pay their shareholders, represent a distribution of profit. The decision to pay dividends, the amount, and the timing are determined by the company’s board of directors. Shareholders receive dividends based on the number of shares they hold, with payments made on a per-share basis.

The dividend payout ratio represents the portion of net income that is distributed as dividends, with investors often preferring this ratio to be below 70%. The dividend yield, calculated by dividing a company’s dividend by its current share price, indicates how much a company pays back to its shareholders in relation to the stock price.

The dividend declaration date, Last Day of Trade, and payment date are the three crucial dates associated with dividend distribution.

What are the main sectors represented on the JSE?

The JSE hosts a broad range of sectors, mirroring the diversity of South Africa’s economy. Investors can find opportunities in a variety of industries, including:

  • Natural resources
  • Financial services
  • Healthcare
  • Technology

This diversity not only provides opportunities for investors to diversify their portfolios but also reflects the robustness of the South African economy and its ability to weather different economic cycles.

How does political stability affect the Johannesburg Stock Exchange (JSE)?

Political stability is a significant factor in the JSE’s performance. Political instability and economic inequality can lead to economic stagnation and threats to institutional integrity, which may adversely affect the Johannesburg Stock Exchange. Political conflict can increase the vulnerability of South Africa’s political settlement, potentially influencing investor confidence and the performance of the JSE.

Political settlements involving economic elites and promises of upward mobility shape the economic landscape, impacting the JSE through changes in market perceptions. Elite contestation within the ruling party and state-owned enterprises can result in systematic looting, affecting the economic environment of the JSE. The intersection of political discontent and economic distress can foster disillusionment among investors, which can negatively impact the JSE.

Transition periods in political leadership, such as the presidency of Cyril Ramaphosa, can provide a temporary reprieve from negative trends but underlying economic challenges remain, influencing the JSE’s trajectory.

What are the key financial metrics used to evaluate JSE stocks?

Investors employ various financial metrics to assess stocks on the JSE. EBITDA, which stands for earnings before interest, taxes, depreciation, and amortisation, is frequently used to assess a company’s cash profits, despite not being part of the Generally Accepted Accounting Principles.

Headline earnings per share (HEPS) is a required disclosure for JSE-listed companies and is a primary metric focused on by analysts, markets, and investors. The price earnings (P/E) ratio, which is the current stock price divided by earnings per share (EPS), is used in South Africa to gauge stock valuation, with HEPS typically forming the basis for EPS calculations.

Dividend yield, calculated by dividing a company’s dividend by its current share price, indicates how much a company pays back to its shareholders in relation to the stock price. The dividend payout ratio expresses the percentage of earnings a company distributes to its shareholders and can change based on the company’s earnings and cash flow situations.

What are the advantages and disadvantages of investing in the JSE?

Investing in the JSE presents a multitude of advantages. It allows investors to:

  • Build wealth over a long period through the buying and holding of various financial instruments
  • Benefit from dividends and the potential for prices to recover after downturns
  • Focus on long-term market fundamentals such as price/earnings ratios and management forecasts, rather than daily market fluctuations
  • Seek consistent growth over decades, especially for pension funds

Investors often hold their investments for years to maximize these advantages.

Investing takes a long-term view and is often associated with retirement accounts, while trading has a short-term focus aiming to maximize returns more frequently. Compared to traders, investors are more likely to withstand short-term losses and hold shares through various market cycles. However, investing in the JSE is not without risks. Just as the potential for returns is high, so too is the potential for losses. The volatile nature of the market means that prices can fluctuate widely in a short period, which can result in significant losses.

How does global market volatility impact the JSE?

Global market volatility can considerably affect the JSE. The JSE experiences increased volatility when there is bad news in the market, responding more significantly to negative events compared to positive ones.

A positive contemporaneous relationship has been found between trading volume and market volatility on the JSE, suggesting that higher trading volumes are associated with greater market volatility. The persistence of volatility on the JSE remains high even when trading volume is considered as an explanatory variable in volatility models, indicating that trading activity does not necessarily reduce volatility persistence.

Feedback between trading volume and volatility exists in the JSE, particularly in post-crisis periods, pointing towards a more complex interaction between market activity and price movement. These findings suggest that market participants should be cautious in their trading behavior due to the positive relationship between trading volume and volatility.

Regulatory practices may need to be strengthened to manage the volatility associated with increasing trading volumes on the JSE.

What are the different investment strategies for the JSE?

Investors can consider various investment strategies for the JSE. Some options include:

  • Using stock brokers who are members of the JSE to facilitate trades and transactions, with many brokers offering online trading platforms.
  • Seeking the guidance of a financial advisor who can provide comprehensive planning including savings advice, insurance, tax, and estate planning, in addition to educating investors about investment topics.
  • Exploring financial service providers that offer indirect investment in equity markets, where they make investment decisions on behalf of clients, but still utilize the services of a stockbroker.

The ‘Do-It-Yourself’ (DIY) approach via a stockbroker allows investors to directly select and manage their investments while using the broker’s trading platform. Investors need to decide on their level of direct involvement in investing, whether it’s through active trading or adopting a more passive investment strategy. The JSE provides access to various markets such as:

  • equity
  • equity derivatives
  • commodity derivatives
  • currency derivatives
  • interest rate products

Investment on the JSE can be done through an electronic trading, clearing, and settlement system, with the assistance of stockbrokers or through online trading platforms.

How does the JSE contribute to job creation and economic growth?

The JSE plays a pivotal role in fostering job creation and stimulating economic growth in South Africa. By diversifying its operations and expanding into new business lines, the JSE supports economic growth, potentially leading to job creation. The JSE’s introduction of new sustainable financial products, such as sustainability bonds and actively managed Exchange Traded Funds (ETFs), may stimulate economic activity and contribute to job creation.

Through the establishment of business ventures like big xyt ecosystems, the JSE is providing data analytics solutions to global stock exchanges, potentially opening up new markets and employment possibilities. Stock exchanges, including the JSE, connect savers and borrowers, facilitating liquidity and enabling individuals, corporations, and governments to trade securities, which is a key component of economic growth.

Stock markets promote economic sustainability by influencing the gross domestic product (GDP) through activities associated with capital raising and investments. Well-functioning stock markets like the JSE accelerate economic growth by easing financial constraints for businesses, enabling expansion and contributing to the wider economy. The JSE provides a regulated and secure environment for trading shares and other financial securities, which boosts business confidence and reduces investment risk.

The JSE operates as an efficient primary and secondary market, with regulations that ensure the issuance of new shares and the ongoing trading of stocks, contributing to economic development. The liquidity provided by stock markets like the JSE allows for:

  • Easier capital allocation
  • Investment
  • Growth
  • Enabling savers to quickly and inexpensively sell their assets

What are the historical trends of the Johannesburg Stock Exchange (JSE) and its future outlook?

Over the years, the JSE has experienced a multitude of highs and lows.

  • Over the past week, the JSE experienced a market upswing of 3.2%, with the Financials sector being the most significant contributor to this rise, showing a 5.4% increase.
  • However, over the last 12 months, the JSE has faced a decline of 3.1% in market performance.
  • Despite these fluctuations, earnings for companies listed on the JSE are projected to grow by 15% annually.

The market is trading at a price-to-earnings (PE) ratio of 12.7x, which exceeds its 3-year average PE of 9.9x, indicating a more optimistic investor sentiment towards the South African market. Company earnings on the JSE have increased by an average of 5.1% per year over the past three years. Revenues for South African listed companies have been growing by 5.2% per year, leading to an overall increase in sales and profits for these companies.

With these trends in mind, the future outlook for the JSE seems promising.

How can I use futures contracts on the JSE for investing?

Investors find futures contracts on the JSE to be a flexible tool. They offer an affordable way to gain exposure to South African bonds without paying the principal or holding the physical bond, unless they keep the future until its expiration. Bond futures can be employed to:

  • Hedge an existing bond portfolio against unfavorable interest rate shifts, potentially preserving the value of the investor’s holdings.
  • Speculate on the direction of interest rates, allowing investors to profit from their predictions.
  • Diversify their investment portfolio by adding a different asset class.
  • Take advantage of leverage, as futures contracts require only a fraction of the total contract value as margin.

The futures contracts on the JSE are standardized and traded on a regulated exchange, which diminishes counterparty risk.

To start investing in futures contracts on the JSE, one must register as a client with an authorized JSE Interest Rate Market Member. Investors are advised to consult with a broker to understand other qualifying factors for trading futures contracts on the JSE.

What are the risks and benefits of trading options on the JSE?

Trading options on the JSE involves both potential risks and benefits. On the one hand, options contracts grant the holder the right but not the obligation to buy or sell the underlying asset upon expiration, providing flexibility in investment strategies. The JSE offers Can Do products, customizable derivative products tailored for client-specific needs that standard derivatives cannot fulfill. These include:

  • Any-day equity derivatives
  • Basket derivatives
  • Quanto derivatives
  • Exotic options

These products offer a diverse range of trading options. Benefits of Can Do products include flexibility in product parameters, transparency with clear specifications, independent daily valuations, and the advantages of being listed and cleared on a common clearing platform.

On the other hand, trading options involves risk. The value of options can fluctuate due to changes in the price of the underlying asset. Therefore, it’s important to understand the risks and rewards before trading options on the JSE.

What kind of derivative do the have on Johannesburg stock exchange?

The Johannesburg Stock Exchange provides a broad spectrum of derivatives for investors, including those available on the South African Futures Exchange. These include equity derivatives that consist of single-stock futures, FTSE/JSE indices futures, Krugerrands, dividend futures, and can-do options. The JSE’s Equity Derivatives Market was originally known as Safex and was established in 1988.

The equity derivatives market on the JSE features both standardized and bespoke contracts, which can be either physically settled or cash-settled. Equity derivatives on the JSE are cleared by JSE Clear to manage counterparty credit risk and ensure transparent price discovery. Profit or loss from trading JSE equity derivatives is realized on a daily basis through the variation margin, which reflects the change in value of the derivative.

JSE equity derivatives have quarterly expiration dates, which occur at midday on the third Thursday of March, June, September, and December.

How can beginners get started with trading futures on the JSE?

For beginners keen on trading futures on the JSE, it commences with grasping the fundamentals of forward contracts and futures. This includes understanding the nature of these derivatives, their purposes, and how they differ from each other. The JSE offers Single Stock Futures (SSF) and Contracts For Difference (CFDs), allowing investors to lock in transaction rates and gain exposure to price movements of underlying shares. To manage dividend-related risks in equity futures, the JSE provides Dividend Futures which settle the difference between actual and expected dividends.

SSFs and CFDs are available for nearly all Top 40 companies listed on the JSE, and there are also index futures that cover a broader range of shares.

What are the differences between futures and options on the JSE?

Although both futures and options on the JSE are types of derivatives, key differences exist between them. Futures contracts on the JSE, also called futures contracts, are derivatives that allow traders to lock in a price of the basic asset or commodity for future delivery, and they are standardized with specific expiration months. Options contracts on the JSE give the holder the right but not the obligation to buy or sell the underlying asset at contract termination, unlike futures contracts which obligate the holder to execute the terms of the contract.

Forward contracts trade over-the-counter (OTC), allowing for bespoke terms like specific delivery dates and amounts, contrasting with the standardized nature of futures on the JSE. Exchange-traded contracts on the JSE, like futures, reduce counterparty credit risk (default risk) because the exchange standardizes and manages the contracts’ exposures in the futures markets.

The JSE offers Single Stock Futures (SSF) and Contracts For Difference (CFDs), which allow investors to capture the price movements of an underlying share’s price movements. Dividend Futures on the JSE settle the difference between actual and expected dividends that were factored into the price of an underlying Single Stock Futures contract. Single Stock Futures and CFDs on the JSE are available for nearly all Top 40 companies listed on the exchange.

In addition to Single Stock Futures and CFDs, the JSE offers index futures which provide exposure to a broader range of shares rather than shares of a single company.

Do they have futures on JSE?

Indeed, the Johannesburg Stock Exchange provides futures contracts. The JSE provides Single Stock Futures (SSF), Contracts For Difference (CFDs), and Dividend Futures. SSFs and CFDs on the JSE allow investors to gain exposure to price movements of the underlying shares. Dividend Futures on the JSE are designed to settle the difference between the actual dividends and the expected dividends used in the pricing of SSFs.

Single Stock Futures and CFDs are available for nearly all Top 40 companies listed on the Johannesburg Stock Exchange. The JSE also lists index futures that allow transactions covering a broader range of shares, not limited to single company shares.

Do they have options on JSE?

Indeed, the Johannesburg Stock Exchange offers options contracts. The JSE runs an Index Options Market-Making Scheme to improve liquidity and transparency for index option contracts, especially for the ALSI Top 40 Index options. Traders have the ability to post competitive bids and offers for various option strikes and expiries without mandatory obligations.

The JSE provides a maker-taker fee model for index options where liquidity providers are not charged a fee on their side of the trade. A market-making incentive scheme is planned to be introduced, which will create formal obligations for market-makers and expand the range of contracts eligible under the scheme.

Who owns JSE?

JSE Limited, a company listed on the exchange itself, operates the Johannesburg Stock Exchange. JSE Limited is a public company, and its shares are traded on the Johannesburg Stock Exchange itself. The majority of JSE Limited shares are held by investors, with a high percentage of free float shares available for trading by the public.

JSE Limited also owns a portion of its own shares, which are company-owned and not available for public trading.

What are the most famous companies coming from South Africa’s JSE exchange?

Some of the world’s most renowned companies listed on the JSE include:

  • British American Tobacco
  • Glencore
  • Prosus
  • Richemont
  • Naspers
  • Anglo American

Additionally, BHP Billiton, although headquartered in Melbourne, has a secondary listing on the JSE and is one of the largest diversified miners globally.

Prosus, a technology investor based in Amsterdam, holds stakes in major consumer internet firms and has secondary listings on the JSE. AB InBev, the world’s largest beer producer based in Belgium, acquired SABMiller and continues to have operations in South Africa, with a secondary listing on the JSE. The Swiss-based natural resource company Glencore, led by a South African CEO, operates in South Africa with a secondary listing on the JSE.

These companies, primarily headquartered outside South Africa and with primary listings on foreign stock exchanges, are the top six most valuable companies on the JSE.

What are the differences between futures and options on the JSE?

Although both futures and options on the JSE are types of derivatives, key differences exist between them. Futures contracts on the JSE, also called futures contracts, are derivatives that allow traders to lock in a price of the basic asset or commodity for future delivery, and they are standardized with specific expiration months. Options contracts on the JSE give the holder the right but not the obligation to buy or sell the underlying asset at contract termination, unlike futures contracts which obligate the holder to execute the terms of the contract.

Forward contracts trade over-the-counter (OTC), allowing for bespoke terms like specific delivery dates and amounts, contrasting with the standardized nature of futures on the JSE. Exchange-traded contracts on the JSE, like futures, reduce counterparty credit risk (default risk) because the exchange standardizes and manages the contracts’ exposures.

The JSE offers Single Stock Futures (SSF) and Contracts For Difference (CFDs), which allow investors to capture the price movements of an underlying share’s price movements. Dividend Futures on the JSE settle the difference between actual and expected dividends that were factored into the price of an underlying Single Stock Futures contract. Single Stock Futures and CFDs on the JSE are available for nearly all Top 40 companies listed on the exchange.

In addition to Single Stock Futures and CFDs, the JSE offers index futures which provide exposure to a broader range of shares rather than shares of a single company.

Summary

The Johannesburg Stock Exchange (JSE) is a vital engine of economic growth and wealth creation in South Africa. Established during the South African gold rush, it has evolved to become a modern, publicly listed company offering a diverse range of financial services. The JSE caters to various investor needs, offering a wide array of asset classes and innovative financial products. It also ensures a transparent and secure trading environment, backed by robust infrastructure and rigorous regulatory oversight. Despite facing market volatility and economic challenges, the JSE continues to play a crucial role in connecting buyers and sellers, facilitating capital raising for listed companies, and contributing to South Africa’s economic growth. As investors, understanding the workings of the JSE can help us make informed decisions and leverage the opportunities it offers. Whether you’re a beginner or an experienced investor, the JSE presents a wealth of opportunities for investment.

Frequently Asked Questions

What are the different asset classes offered by the JSE?

The JSE offers a diverse range of asset classes, including equities, bonds, currency instruments, and interest rate derivatives. This provides investors with a variety of options to diversify their portfolios.

How does the JSE ensure a secure and trustworthy trading environment?

The JSE ensures a secure and trustworthy trading environment by implementing measures such as electronic settlement, T+3 settlement system, technological solutions, the BDA system, and capital adequacy monitoring. These measures work together to maintain integrity and security in the trading environment.

What are the key financial metrics used to evaluate JSE stocks?

Investors use EBITDA, HEPS, P/E ratio, dividend yield, and the dividend payout ratio to evaluate JSE stocks effectively.

How can I use futures contracts on the JSE for investing?

You can use futures contracts on the JSE to gain exposure to South African bonds without holding the physical bond, and they can also be used to hedge an existing bond portfolio against interest rate shifts. Consider utilizing bond futures for investing in this asset class.

What are the differences between futures and options on the JSE?

The main difference between futures and options on the JSE is that futures allow traders to lock in a price for future delivery, while options give the holder the right to buy or sell the underlying asset at contract termination. This can provide different risk and reward profiles for traders.

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