South Africa’s FSCA Suspends ZAR X’s Exchange License

South Africa’s Financial Sector Conduct Authority (FSCA) suspended the exchange license of ZAR X on August 20, 2021. ZAR X was founded 5 years ago and was the first new stock exchange in South Africa in 58 years. ZAR X is in competition with the JSE.

“The suspension resulted from ZAR X’s non-compliance with section 8(1)(a) of the Financial Markets Act (FMA), read with Regulation 8 and 43(2) of the FMA Regulations, which relate to the liquidity and capital adequacy requirements of an exchange,” the FSCA said in a statement.

“We don’t take this regulatory action lightly, given its impact,” FSCA commissioner Unathi Kamlana said in a statement. “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.”

In 2018, the Public Investment Corporation (PIC), on behalf of the Government Employees Pension Fund, bought a 24.14% stake in ZAR X. PIC is the largest shareholder in ZAR X.

ZAR X faced closure and the FSCA is concerned about the exchange’s capital adequacy. ZAR X has to provide the FSCA with weekly progress reports in the meantime. PIC claims that ZAR X’s license suspension was due to the exchange’s failure to approve an international investment in the exchange.