African Rainbow Capital (ARC) has taken an initial 20% stake in A2X Markets, a new stock exchange in South Africa that is looking to compete directly with the JSE.

The transaction terms allow ARC to increase this equity stake to 25% following the company securing its exchange licence.

A2X is a start-up, founded by individuals with extensive, proven experience in financial markets and technology.

A2X is in the advanced stages of its stock exchange licence application and aims to be operational by the end of 2017.

Johan van der Merwe, ARC Co-CEO, said: “We are excited to play a role in building an alternative stock exchange in South Africa with strong BEE credentials.” 

“With ARC’s industry relationships, this investment will help unlock significant opportunities for A2X,” he said.

A2X business model brings competition to the South African financial markets in an area that has been the sole domain of one dominant player for many years.

A2X aims to offer a competitive offering encouraging the overall growth of the South African equity market through expansion of the market’s investor base and enhancing market efficiency.

The Exchange will be styled on the European Multilateral Trading Facility model listing qualifying equity securities. 

A2X will clear all trades executed on it, overseeing and providing assurance of settlement using Strate as its CSD.

The Exchange said it will provide a secondary listings platform to many of SA’s top companies. 

Using the latest trading, surveillance and clearing technology, supplied by UK based Aquis Technologies, a division of Aquis Exchange, and applying modern and innovative business practices, it will offer an alternative exchange to execute equities at a reduced cost.

Kevin Brady, A2X CEO, said “the local market is crying out for competition and the benefits it brings, and the fact that ARC, founded and led by individuals with proven track records, has taken a strategic stake in A2X is a massive vote of confidence in what we are trying to do.”

ARC is a fully black owned and controlled investment company focusing on the South African and African financial services industry and businesses. 

ARC has over the past year made several investments in the finance industry, including Alexander Forbes, Colourfield Liability Solutions and Sinayo Securities.

Patrice Motsepe, ARC Founder, said: “We see tremendous potential in this opportunity and we are proud to be able to bring broad-based black controlled capital to an initiative that will fundamentally bring effective competition in an industry traditionally dominated by one player. Ultimately, competition drives market efficiencies and this benefits all users, including individual investors and pensioners”.

“This deal provides the basis for a long-standing mutually beneficial relationship. ARC shares our entrepreneurial spirit, values and a culture of openness and transparency,” added A2X chairman Ashley Mendelowitz, a financial markets technology veteran, who co-founded A2X with Brady and Peregrine Holdings founder Sean Melnick.