The Financial Sector Conduct Authority (FSCA) has suspended the exchange licence of stock exchange, ZAR X, over liquidity and capital adequacy concerns.
The suspension has been in effect since Friday (20 August), and the exchange has three months to get its affairs in order or face having its licence cancelled.
According to the FSCA, the suspension resulted from ZAR X’s non-compliance with Financial Markets Act regulations relating to an exchange’s liquidity and capital adequacy requirements.
The suspension was effected with the concurrence of the Prudential Authority and the South African Reserve Bank, it said.
While ZAR X is still allowed to operate as an exchange to give effect to transactions in progress, or transactions that were not finalised by the suspension date and time, it may not allow further trading or accept new issuers.
The suspension will remain effective until the earlier of either of the following has taken place:
- ZAR X rectifies its non-compliance with the capital adequacy requirements to the satisfaction of the FSCA and the PA, in which case the suspension may be lifted; or
- The FSCA makes a final decision on the cancellation of ZAR X’s exchange licence.
The FSCA said it intends to proceed, three months after the date of suspension, with the cancellation of ZARX’s exchange licence should it fail to rectify its non-compliance with the capital adequacy requirements.
Over the suspension period, ZAR X needs to inform all affected persons, including issuers with listed securities on its exchange, authorised users of its exchange, investors, and stakeholders, that its licence has been suspended.
It also needs to provide the FSCA with weekly progress reports on the matters declared in the suspension notice.
“We don’t take this regulatory action lightly, given its impact. Our view, however, is that this is a necessary step to safeguard market integrity and the interest of issuers and the broader investing public. This is the cornerstone of our mandate as the FSCA,” said FSCA Commissioner Unathi Kamlana.