The increasing integration of advanced technologies such as AI and data analytics to enhance trading strategies and improve market transparency were among key takeaways from the JSE SA Trade Connect conference, SA’s premier equity market structure conference, held in Cape Town earlier this year.

The conference also highlighted the critical need for a balanced regulatory framework that supports market liquidity and innovation without imposing an undue burden on market participants. Discussions underscored the importance of collaboration among regulators, brokers and other stakeholders to ensure that new regulations do not inadvertently stifle market growth.

‘Participants emphasised the necessity of harmonising local regulations with international standards while retaining the unique nuances of the South African market,’ says Vuyo Mashiqa, the JSE’s Head of Equities and Equity Derivatives.

JSE SA Trade Connect brought together local and international experts to exchange ideas and insights on a range of topics allied to this year’s theme centred on the impact of regulation and evolving market structure on the trading business model.

‘The speakers noted the growing influence of systematic and algorithmic trading, which is reshaping liquidity dynamics and market structures. This trend underscores the need for robust risk management and regulatory oversight to mitigate potential systemic risks,’ according to Mashiqa.

SA’s regulatory framework is progressively aligning with global standards, particularly in areas such as market transparency, investor protection and risk management, he adds. However, discussions revealed that SA still faces challenges in fully integrating with international norms. The regulatory environment is sometimes seen as fragmented, with a need for greater coherence and collaboration among regulatory bodies.

Speakers went into depth about the ways the local brokering business model could evolve in the next couple of years and, again, technology was strongly emphasised. Brokers are expected to increasingly adopt advanced technologies, such as AI and machine learning, to enhance trading strategies and improve execution. Secondly, collaboration and partnerships will become more prominent. Smaller brokers may partner with larger, more technologically advanced firms to leverage their infrastructure and reduce costs. This tiered broking model allows smaller firms to focus on their niche markets and client relationships while accessing broader market capabilities.

‘Furthermore, brokers will need to navigate the challenges and opportunities presented by market fragmentation. Developing strategies to efficiently route orders across multiple trading venues will be crucial to maintaining liquidity and providing the best execution for clients,’ says Mashiqa.

Tech in the form of AI and data analytics is revolutionising trading strategies, he says. ‘These technologies enable brokers to optimise trade execution, manage risks more effectively and respond swiftly to market movements. The JSE is also embracing this technological evolution.

‘We announced recently that we are collaborating with Amazon Web Services to modernise our technology and explore AI to deliver market solutions and drive operational efficiencies. This move will also revolutionise the delivery of real-time market data in the cloud and drive industry innovation.’

The transformative journey will focus on market infrastructure and the facilitation of evolutionary trading-enablement technologies for seamless connectivity with clients. The JSE will start by embarking on upgrading its Broker Dealer Accounting (BDA) system, says Mashiqa.

The BDA system is a critical application used by the JSE to manage risk and ensure the seamless functioning of equity markets. The demands of modern, always-on capital markets require the BDA system to be modernised from its legacy mainframe environment in order to meet the needs of broker dealers while maintaining the JSE’s status as a world class exchange.

‘Overall, the conference reinforced the need for a strategic, collaborative and adaptive regulatory environment to foster a resilient and dynamic market ecosystem.’

By Patrick Farrell
Image: Gallo/Getty Images