By Merlin Rajah, Head: Equities Electronic Product at Absa CIB.
Infrastructure Evolution: JSE’s Leap Forward
For exchanges, High-Frequency Trading (HFT) firms are a significant revenue driver – generating income through execution, clearing, settlement, colocation, and market data services. Sell-side firms benefit as well, gaining a steady revenue stream and an increased market share.
A major turning point came in 2012 when the Johannesburg Stock Exchange (JSE) migrated to the Millennium IT platform (owned by the London Stock Exchange Group). Two years later, the JSE introduced its colocation facility, offering traders ultra-low-latency access.
The Millennium platform supports both Native and FIX protocols for order entry, post-trade processing, and drop copies, along with market data feeds via the MITCH (Millennium ITCH) and FIX/FAST protocols. Many firms prefer native binary protocols for their speed and unthrottled MITCH feeds to capture every possible microsecond advantage in market data processing.
For firms trading in South Africa, opting for the unthrottled feed over the throttled version is essential. The JSE has continuously enhanced their platform to meet the needs of both institutional investors and HFT players. A key upgrade came in 2024 with the implementation of self-match prevention – designed to prevent internal teams from inadvertently trading against themselves, a costly mistake both in fees and regulatory scrutiny. On the other side of the spectrum, tools like pegged hidden orders, central order book crossing for client/prop flows, and spread-sensitive execution features have been rolled out to support institutional and sell-side players in navigating fast-paced, HFT-dominated markets. Today, South Africa’s equity markets trade approximately US$1.4 billion a day, with 90% of this trading happening on-screen.
Colocation 2.0: World-Class Access at Lower Costs
Though compact, the JSE’s colocation facility is a Tier 3 data centre meeting global standards. It’s equipped with robust battery and generator backup-critical in a country where power outages remain a challenge. The 2023 launch of Colocation 2.0, in partnership with Beeks and IPC, introduced cloud-based access options. This provides a lower-barrier entry point for firms wanting to explore Africa’s most sophisticated exchange. Starting at under $200 per month (excluding data costs), firms can connect to the JSE’s test environment, market data, and reference data feeds from within the collocated ecosystem.
These infrastructure upgrades have laid the groundwork for international quant and HFT firms to target South Africa, with a noticeable uptick in trading volume and order flow to show for it. Global HFT firms are looking to South Africa to further diversify their presence away from the well-known West/Eastern markets.
The Rise of Retail
Retail equity trading in South Africa has seen a notable uptick in recent years, driven by greater accessibility to online trading platforms, the rise of fintech, and an increasingly financially literate population. Low-cost brokers and app-based trading platforms have played a significant role in democratising access to the JSE, enabling everyday South Africans to invest in local stocks with minimal capital. This shift has been particularly pronounced among younger investors, who are more digitally savvy and inclined toward self-directed investment strategies.
Although individual (retail) investors still trade less than big institutions and high-frequency traders, their increasing involvement in the market is having a real impact. As a result, brokers are responding by improving their platforms – making them easier to use, reducing trading fees, and providing more educational resources and tools to help these newer investors make informed decisions.
Much more can be done in this space to provide retail with live pricing.
This has also been a contributing factor as HFT firms want to trade with retail participants who trade through the spread.
A2X and Market Competition: Fuelling Sophistication
The local trading landscape has also become more competitive, due to alternative venues like A2X.
Offering advanced technology and competitive fees, A2X has carved out a decent market share by attracting both local and global trading firms. With no admit-to-trade model, however, or a stance on an MTF framework, it has been a difficult journey for A2X to onboard new issuers, but it has done exceptionally well in terms of onboarding 180+ listings with a market capitalisation of R9 trillion. This is a boon for HFT firms, who benefit from increased liquidity and more arbitrage opportunities across exchanges.
The emergence of multiple trading venues has pushed sell-side firms to enhance their technological capabilities – implementing smart order routers, upgrading sell-side algorithms, robust settlement solutions and offering low-latency access to enable both institutional clients and HFTs to execute efficiently. This growing sophistication reflects the broader maturation of South Africa’s capital markets.
A Market of Strategic Importance
As these firms deepen their presence, they’re contributing to the ongoing evolution of the market and the continent – driving innovation, improving efficiency, and expanding participation. For success in this market, HFT firms require ultra-low-latency access, a robust stock loan pool, and a strong balance sheet to support advanced trading strategies. Africa has vast capital market potential, and unlocking these capabilities will help channel liquidity towards critical business and infrastructure projects to power the continent’s next chapter.
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