The record-breaking trading volume was due to the implementation of a share swap deal between Naspers and Prosus this week, which allowed Naspers shareholders to swap their shares for newly created shares in Prosus.
The start of equities trading on South Africa’s main stock exchange was delayed Wednesday after the bourse was unable to fully process record transactions in the previous session as investors adjusted their holdings in local market giant Naspers Ltd.
The transaction increased the number of tradeable shares in Prosus and shrank the number of Naspers tradeable shares.
Tuesday saw 145 billion rand ($9.7 billion) of equities traded, which caused “significant delays” in processing on some systems, bourse operator JSE Ltd. said. Trading was due to start at 9 a.m. local time, but the exchange said at 12 p.m. that the open is still delayed and that it would update clients an hour later.
This meant that Naspers now has a smaller weighting in the JSE’s indices, and index-tracking funds had to sell their Naspers shares (and buy Prosus shares) to reflect this, said FNB Wealth and Investments head of research Chantal Marx.
This fuelled the record trading volumes on the JSE on Tuesday. Naspers’ share price slumped 8% following the “rebalancing” – but also due a fall in the Chinese digital giant’s Tencent’s share price on Tuesday. Prosus owns 28% of Tencent.
The JSE is seemingly moving closer to restarting trade on Wednesday, after remaining closed all morning.
“Significantly high trading volumes yesterday, 17 August 2021, due to large corporate actions, including a record day of value traded in Equities, trading R145 billion (vs R71 billion in December 2017) has resulted in the JSE experiencing significant delays in processing these trades on some of its systems. This has resulted in a delay in the start of trading for the JSE equity market,” the JSE said in a statement.
According to the head of a large dealing desk, the JSE is seemingly struggling with “system issues” due to the record volumes.
By mid-morning on Wednesday, no transactions had been fed through to the JSE’s broker deal accounting (BDA) system. But just after midday, traders received a notice from the JSE that the BDA files were available.
In a statement to clients, the JSE had said the next update would be provided at 13:00 on Wednesday.
JSE Ltd. said it is engaging market participants and will provide “ample notice” on the start of trading to ensure a smooth and orderly opening. Its other markets were operating as normal, the company said.
Tuesday’s trading surpassed a previous record of 71 billion rand from December 2017, the exchange operator said. In 2017, the JSE paid out claims from clients and conducted reviews after suffering a delay in trading.
The Johannesburg bourse experienced “elevated activity” yesterday as rebalancing took place in the wake of the Naspers/Prosus share swap, Siobhan Redford, an analyst at Rand Merchant Bank in Johannesburg, said in a note to clients.