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4.4. The law, the equity exchange and listing

When marketable equity is issued it is listed on the financial exchange of the country (there may be more than one exchange). What does this mean? All17 countries have equity exchanges and all exchanges are licensed under a statute. The statute usually defines an exchange and its functions and has many provisions regarding the listing of equities.

In South Africa, for example, the Securities Services Act (SSA) defines an exchange as (section 1):

"... means a person who constitutes, maintains and provides an infrastructure -

a) for bringing together buyers and sellers of securities;

b) for matching the orders for securities of multiple buyers and sellers; and

c) whereby a matched order for securities constitutes a transaction..."

In respect of the general functions of an exchange the SSA (section 11) determines: Section 11 determines:

".(1) An exchange -

a) must enforce the exchange rules and listing requirements;

b) must supervise compliance by authorized users with this Act and the exchange rules;

c) may issue directives;

d) may amend or suspend the exchange rules in terms of section 61, and may amend its listing requirements in consultation with the registrar;

e) (i) must make provision for the clearing and settlement of transactions in listed securities

effected through the exchange;

(ii) may appoint a clearing house licensed in terms of section 66 to perform clearing house services for the exchange in accordance with the exchange rules;

(iii) must consult with an appointed clearing house when making or amending exchange rules pertaining to clearing and settlement;

f) must supervise compliance by issuers of listed securities with the listing requirements, the exchange rules and this Act."

In respect of listing requirements the SSA (section 12) determines:

".(1) An exchange must make listing requirements which prescribe -

a) the manner in which securities may be listed or removed from the list or in which the trading in listed securities may be suspended;

b) the requirements with which issuers of listed securities and of securities which are intended to be listed, as well as such issuers' agents, must comply;

c) the standards of conduct that issuers of listed securities and their directors, officers and agents must meet;

d) the standards of disclosure and corporate governance that issuers of listed securities must meet.

(6) An exchange -

a) must keep a list of the securities which may be traded on the exchange;

b) must receive and consider, and may grant, defer or refuse, subject to its listing requirements and any other conditions that it may determine, applications for the inclusion of securities in the list;

c) may include securities issued by it in its own list subject to the approval of and the conditions prescribed by the registrar."

The SSA also determines that the exchange will be managed by the Rules and Directives of the exchange which must be approved by the Registrar (the licensing body).

The details of the listing requirements are contained in a separate Listings Requirements document. Box 1 presents the sections of this document which provides a hint of the requirements.

The share listing requirements are onerous, because the listing and trading of listed shares is the business of exchange. South Africa is also moving towards international best practice in this regard, leading to greater disclosure, in an effort to perfect local and foreign investor confidence in the equity market.

Introduction Definitions

Authority of the committee Sponsors

Continuing obligations Conditions for listing

Methods and procedures of bringing securities to listing

Pre-listing statements

Listing particulars

Financial information


Transactions with related parties Circulars and announcements Mineral companies Property companies Special types of issuer Investment entities

Documents to be submitted to the committee Listing and other fees

Dual listings and listings by overseas companies STRATE

Transitional requirements Schedules

Box 1: Sections covered in JSE (Equities Division) listings requirements document

We will return to the listing requirements later.

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