Bond Exchange of South Africa
Encyclopedia
The Bond Exchange of South Africa Limited (BESA) is an independent, licensed exchange, constituted as a public company, and responsible for operating and regulating the debt securities and interest rate
derivatives
markets in South Africa.
s markets in South Africa.
BESA was granted its exchange license in 1996 and over the past twelve years has been at the forefront of market development in South Africa. As an exchange, BESA is in the business of building better markets by providing a range of platforms and services to address the needs of capital market participants, be it issuers, market maker
s, traders or investors.
In December 2007, BESA entered a new era, successfully converting from a mutual association to a public company. This was followed by a well supported rights issue which was concluded in October 2008, successfully injecting fresh capital into the business and introducing new strategic partners to the exchange. With demutualisation and capitalisation achieved, BESA has over the past year, focused attention on furthering capital market infrastructure in South Africa through the introduction of projects such as BondClear Limited (a comprehensive clearing solution developed in partnership with NASDAQ OMX) and Justrade.com (South Africa’s first online binary options exchange), in addition to continuing to advance the exchange’s traditional bond franchise for the benefit of all market participants.
(FSB). BESA's rules and directives serve as a tool for regulating both issuers and trading participants. All securities listed by the Exchange must meet minimum disclosure standards. Extensive rules also apply to trading participants, with BESA undertaking active surveillance over all aspects of market activity as well as requiring compliance with a variety of best-practice standards. The Exchange provides various investor-protection mechanisms, including a guarantee fund to compensate counter-parties for any market movement losses arising from a trading default. To the Exchange’s credit, no participant defaults or claims on the fund have ever been lodged with BESA.South Africa
The local bond market is still dominated by securities issued by the South African government, with local government, public enterprises and major corporations accounting for the rest of the debt issuers active in the market. The number of borrowers and listed bonds as well as the market capitalisation have all risen sharply – at December 2008 BESA had listed some 1,102 debt securities, issued by 100 sovereign and corporate borrowers, with a total market cap of R935 billion.
Turmoil in global financial markets and conditions in the domestic economy in 2008 rendered the expansion of the primary bond market difficult. Notwithstanding this, bond listings on BESA grew by 5.6% on the previous year, albeit the slowest rate of growth since 2002. The bulk of this growth (37%) can be attributed to the increased issuance of commercial paper by corporates as well as increased issuance by state owned enterprises. Central government listings still accounted for the bulk of listings on the Exchange.
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
derivatives
Derivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
markets in South Africa.
History
The Bond Exchange of South Africa Limited (BESA) is an independent, licensed exchange, constituted as a public company, and responsible for operating and regulating the debt securities and interest rate derivativeInterest rate derivative
An interest rate derivative is a derivative where the underlying asset is the right to pay or receive a notional amount of money at a given interest rate...
s markets in South Africa.
BESA was granted its exchange license in 1996 and over the past twelve years has been at the forefront of market development in South Africa. As an exchange, BESA is in the business of building better markets by providing a range of platforms and services to address the needs of capital market participants, be it issuers, market maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
s, traders or investors.
In December 2007, BESA entered a new era, successfully converting from a mutual association to a public company. This was followed by a well supported rights issue which was concluded in October 2008, successfully injecting fresh capital into the business and introducing new strategic partners to the exchange. With demutualisation and capitalisation achieved, BESA has over the past year, focused attention on furthering capital market infrastructure in South Africa through the introduction of projects such as BondClear Limited (a comprehensive clearing solution developed in partnership with NASDAQ OMX) and Justrade.com (South Africa’s first online binary options exchange), in addition to continuing to advance the exchange’s traditional bond franchise for the benefit of all market participants.
Rules and protections
As the direct regulator of the bond market, BESA operates within the framework of the Securities Services Act 2004 and a set of rules and directives approved by the Financial Services BoardFinancial Services Board (South Africa)
The Financial Services Board is the government of South Africa financial regulatory agency responsible for the non-banking financial services industry in South Africa. It is an independent body that supervises and regulates the financial services industry in the public interest...
(FSB). BESA's rules and directives serve as a tool for regulating both issuers and trading participants. All securities listed by the Exchange must meet minimum disclosure standards. Extensive rules also apply to trading participants, with BESA undertaking active surveillance over all aspects of market activity as well as requiring compliance with a variety of best-practice standards. The Exchange provides various investor-protection mechanisms, including a guarantee fund to compensate counter-parties for any market movement losses arising from a trading default. To the Exchange’s credit, no participant defaults or claims on the fund have ever been lodged with BESA.South Africa
Turnover
The South African bond market is a leader among emerging-market economies. Turnover reported on BESA in 2008 reached a record R19.2 trillion. Given listed debt securities of R825 billion nominal, overall market velocity in the local market was 23, up from 17.7 reported in 2007. However, when offshore OTS trades are included, turnover velocity for the year was 29, up from 24 in 2007.The local bond market is still dominated by securities issued by the South African government, with local government, public enterprises and major corporations accounting for the rest of the debt issuers active in the market. The number of borrowers and listed bonds as well as the market capitalisation have all risen sharply – at December 2008 BESA had listed some 1,102 debt securities, issued by 100 sovereign and corporate borrowers, with a total market cap of R935 billion.
Turmoil in global financial markets and conditions in the domestic economy in 2008 rendered the expansion of the primary bond market difficult. Notwithstanding this, bond listings on BESA grew by 5.6% on the previous year, albeit the slowest rate of growth since 2002. The bulk of this growth (37%) can be attributed to the increased issuance of commercial paper by corporates as well as increased issuance by state owned enterprises. Central government listings still accounted for the bulk of listings on the Exchange.