Traders reject JSE’s 24-hour trading plan

Like an enamoured younger sibling, the JSE was quick to leap on the bandwagon last week, announcing that it would be following the lead of the London Stock Exchange in considering round-the-clock trading.

It would be a brave move, but not unprecedented – longer trading windows have been a hot topic among exchanges trying to remain relevant as more investors flee public markets for private equity. The New York Stock Exchange recently extended its hours from 1.30am until 11.30pm, and the Nasdaq plans to operate all night from 2026.

The JSE is arguing that 24-hour trading is warranted by the number of dual-listed companies on the exchange. But brokers and traders contacted by Currency are deeply sceptical, saying South Africa’s thin trading volumes make this unviable.

“Who wants to deal in Shoprite at 3am?” asks veteran stockbroker David Shapiro. “Our daily volumes are [already] so pathetic.”

Shapiro says if the argument is that it will provide more opportunity to trade in the dual-listed shares, this doesn’t wash, as most of these companies are on European exchanges, which align with the JSE’s existing hours.

While South Africa may draw some attention from investors in countries such as Australia and Japan, Shapiro says that, even then, these listings do not have enough global traction to sustain the trading volume to justify a 24-hour market.

Technology company Prosus, luxury goods company Richemont, banking group Investec and British American Tobacco are all listed in other jurisdictions, but Shapiro says: “I don’t think they are of a global appeal.”

And, when you exclude the dual-listed stocks, Shapiro says there are even fewer shares with the pull to be relevant on a 24-hour market.

The complexion of South Africa’s market also doesn’t fit a 24-hour exchange, he says.

While tech and software businesses are all the rage on other exchanges, South Africans “get excited about banks, we get excited about retailers, we get excited about property. I mean, who wants to deal in property in Australia at midnight – no-one.”

Charles Savage, the CEO of EasyEquities, argues that extending the JSE’s hours could simply compound the liquidity problem as, aside from a few large companies, there are many stocks with very low trading volumes.

Spreading these thin volumes over an even-longer period would help nobody.

 “This may negatively impact price stability,” says Savage, which may even discourage traders or retail investors from dabbling on the bourse.

This is a concern amplified by Priniel Gungudoo, the head of trading at First National Bank, who warns that a 24-hour market may lead to less, rather than more, trading.

“Instruments only trade when there is a counterparty – meaning there need to be other investors or traders active at the time,” he says. Liquidity could dry up, and traders would have little to do but twiddle their thumbs.

Boon for retail investors

Yet, proponents of 24-hour trading argue that the benefits of extended hours have already been proven by other bourses.

Savage says Nasdaq, the technology exchange in New York, is a robust example of a successful transition to becoming a round-the-clock exchange. “The JSE can realistically follow suit, given sufficient commitment and resources,” he says.

Valdene Reddy, the director of capital markets at the JSE, has said the primary motivation for considering this change is so that traders can express a constant view, enabling real-time responses to global events.

Gungudoo says this is probably the best argument in favour of 24-hour trading.

“The velocity at which news will reflect into an instrument’s price will be immediate, meaning that it will improve market efficiency,” he says.

Being nimbler in reacting to news would give the JSE an edge over other lagging exchanges, which would open up new opportunities, he adds.

It would also be a boost for smaller retail investors. In the US, round-the-clock trading has been led to increased retail trading on the Robinhood platform, the American counterpart to EasyEquities. User engagement has risen too, leading to a rise in the liquidity of some stocks in the US.

Savage says there is no doubt that EasyEquities could seamlessly transition to continuous JSE trading hours – and  would probably see a similar rise in activity.

Many of the advantages of a 24-hour market hinge on a number of “ifs”: if the JSE can afford to invest in the infrastructure, if new technology is deployed, if staff can be deployed cost efficiently to make this new monolithic system work.

It’s not impossible, but experts are hesitant to fully endorse the idea just yet.

“In our environment, I’m not quite sure how [a 24-hour system] would operate,” Shapiro says. He points, in particular, to the JSE’s “antiquated” technology system, which might crumble under the pressure of change this radical.

While new technology would be needed, Gungudoo argues that blockchain technology could play a role in underpinning 24-hour equities trading, much like it does for the crypto market, where it allows for immediate settlement. 

“But again, this will require wholesale change and major industry effort and cost,” he concedes.

‘Not feasible’

At this point, Gungudoo says, a 24-hour trading system for the JSE is not feasible. “If you just consider how challenging the move away from broker dealer accounting and even [shortening the settlement time of trades was], it seems like a tough ask.”

System upgrades would be eye-wateringly expensive, let alone the cost of having actual dealers on desks to support traders after hours.

It isn’t just the JSE that might have bitten off more than it can chew with this announcement – few experts think a nonstop system is a fully worthwhile undertaking.

Just because you can have a constant market, doesn’t necessarily mean you should.

It seems a compromise solution might be a good start: extend the JSE’s hours when global events demand immediate action, but FOMO alone shouldn’t push the JSE into creating an even-thinner, more volatile market.

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