The financial world constantly evolves, and staying ahead of the curve requires insight from industry experts. The SAIFM Regulatory Summit 2023, held on August 23rd, provided a platform for thought leaders to discuss the key issues in the financial sector. Among the highly anticipated panel discussions was “Industry Ideas for Exchange Services Needs,” featuring distinguished professionals. The panel, chaired by Mr. Adam Reeves, a Distribution Specialist at ABSA Bank and SAIFM Board of Governors Chair, delved into various aspects of exchange services, emerging trends, regulatory challenges, and the role of technology in shaping the future.
1. Mr. Adam Reeves: With years of experience in the industry, Mr. Reeves brought valuable insights to the discussion. He highlighted several key points during the panel, including the regulatory landscape in South Africa, the structure of exchanges, and the wide array of products available, emphasising the peace of mind provided by exchanges’ rigorous vetting procedures and regulations.
2. Mr. Emile Fourie: A Director at Orpheus Capital, Mr. Fourie established himself as a leading voice in the industry through his work in portfolio management. His contributions to the panel centred on the challenges posed by overregulation in South Africa, the advantages of the Swiss Exchange, and the evolving landscape of structured products and private equity.
3. Mr. André Buck: Although his insights were presented via a recorded presentation, Mr. André Buck, the Global Head Sales & Relationship Management at SIX Swiss Exchange AG, provided valuable perspectives on the global exchange landscape.
Adam Reeves’ Main Points:
- South African regulation currently prohibits Over-the-Counter (OTC) instruments.
- Exchanges are organised markets where a wide range of tradable securities, commodities, foreign exchange, futures, and options contracts are bought and sold. They comprise an independent marketplace, an independent valuer, and a preset settlement infrastructure.
- Over 1.5 million products are available on exchanges.
- Exchanges offer security and assurance through stringent vetting procedures and regulatory oversight.
- On the Swiss Exchange, investors can collateralise exposure to counterparty issuers for a modest fee of 0.25% per annum.
Emile Fourie’s Main Points:
- Overregulation is a significant obstacle to exchange services in South Africa.
- The Swiss Exchange stands out due to its versatility, allowing for various collateral options, including physical property.
- Structured products are subject to regulation but offer opportunities for creating liquid strategies, reference indexes, and private equity assets.
- The future of private equity may involve issuing certificates rather than complex structures.
- The Swiss Exchange demonstrates high sophistication, enabling innovative product offerings.
- South African Actively Managed Certificates (AMCs) differ from their European counterparts. They are categorised as debt or notes and are typically bank-issued. They have limitations and can only invest in assets available on other exchanges.
- The desire to align South African exchanges with global counterparts’ prompts calls for amendments to the Financial Markets Act. This would enable structured products to be traded on exchanges, increasing market access, transparency, settlement efficiency, collateralisation, and execution.
- Offshore AMCs can be employed for various purposes, provided their valuation is feasible.
The SAIFM Regulatory Summit 2023 brought together industry experts to explore the evolving landscape of exchange services. Panelists like Adam Reeves, Emile Fourie, and André Buck shared valuable insights, highlighting the need for regulatory adjustments in South Africa to foster innovation and competitiveness. As global financial markets continue to evolve, adapting and staying ahead of the curve remains essential for all stakeholders in the industry.