Blog : 12 December 2016 (JSE Market Profile Stats, November 2016)

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We take a look at some of South Africa's stock market, the Johannesburg Stock Exchange (JSE), trading statistics. What it shows is the fact that trading is heading in the direction of "bots" and that gearing and geared instruments seems to be favoured over more traditional stocks and equitys.

Rand value of equities bought
The bar chart above shows the total Rand value of trades per year from the beginning of each year till the end of November of each year. The latest statistics available is only up to end of November and for comparison purposes with other years we took their trade values from January to November too. .
The blue bars shows the nominal value of equities traded (thats current Rand values, not adjusted for inflation). The grey bar's shows the real Rand value of equities traded, I.e the value of the trades were adjusted for inflation. This assists in identifying the actual growth in value of trades that is not affected by inflation. While both the blue and grey bars shows strong growth over time, the growth is a lot lower when the effects of inflation is removed from the data.
Inflation adjusted value of trade in equities have increased by 36% from 2011 to 2016, while inflation adjusted value of trade in derivatives have increased by 19.8%
The blue bars shows the nominal value of equities traded (thats current Rand values, not adjusted for inflation). The grey bar's shows the real Rand value of equities traded, I.e the value of the trades were adjusted for inflation. This assists in identifying the actual growth in value of trades that is not affected by inflation. While both the blue and grey bars shows strong growth over time, the growth is a lot lower when the effects of inflation is removed from the data.
Inflation adjusted value of trade in equities have increased by 36% from 2011 to 2016, while inflation adjusted value of trade in derivatives have increased by 19.8%
Rand value of equities and derivatives
The bar chart below shows the inflation adjusted Rand value of equities and derivatives bought from January to November of each year.
As is clear from the bar chart the value of derivative trades is far larger than those of equities. Easier for market participants to gain greater exposure to the market using geared instruments. Less initial capital outlay for greater exposure to the market. But it does carry a lot more risk and can see market participants lose more money than they put in as they using "borrowed" money and if their position moves against them they need to start paying in money or close their positions in order to cover outstanding costs.
The bar chart below shows the average inflation adjusted Rand value per trade on the JSE for both equities and derivatives. As the bar chart shows the value per transaction has dropped off significantly every year. Even though as the bar charts above show, the total value of trades have gone up every year. What this implies is that the number of transactions have increased, and this is possibly due to the introduction and use of algorithmic trading bots.
The line graph below shows the number of transactions from January to November of each year for both equities and derivative instruments. As can be seen from it the number of transactions have increased sharply, both for equities and derivatives since 2010.
The number of equity transactions have increased by 166% from 2011 to 2016 (while the inflation adjustedvalue of trade only increased by 36%). The number of derivative transactions have increased by 60% from 2011 to 2016 (while the inflation adjusted value of trade in derivatives only increased by 19.8%). We doubt the number of participants in the market have grown by this percentage since 2011. We can therefore only assume that the same participants have changed their behaviour in terms of how they acquire shares and equities.
The table below takes a look at average Rand value per transaction for both equities and derivatives, and calculates a ratio of derivatives to equities (and calculates a ratio after removing estimated gearing). It comes to the conclusion that the average capital committed to a geared trade is three times that of equity trade by 2016. Up from 2 times in 2010.
*Note for the column that gearing was removed average gearing of 7 times was assumed
The table below takes a look at average Rand value per transaction for both equities and derivatives, and calculates a ratio of derivatives to equities (and calculates a ratio after removing estimated gearing). It comes to the conclusion that the average capital committed to a geared trade is three times that of equity trade by 2016. Up from 2 times in 2010.
*Note for the column that gearing was removed average gearing of 7 times was assumed
Date 
Equities (E) 
Derivatives (D) 
Ratio (D/E) 
Ratio (gearing removed) 
2011 
118 026.5 
1 755 204.3 
14.9 
2.12 
2012 
116 134.2 
1723 450.2 
14.8 
2.12 
2013 
87 456.93 
1 526 407.8 
17.5 
2.49 
2014 
71 091.18 
1 435 834.5 
20.2 
2.89 
2015 
61 984.49 
1 393 581.1 
22.5 
3.21 
2016 
60 485.11 
1 305 631.9 
21.6 
3.08 
From the table it is clear that derivative transactions while being fewer than equity transactions is far greater in value (as shown in Ratio) column. Derivative transaction being over 21 times greater in value per transaction in 2016 than equity transactions. After gearing is removed it still shows that the value of cash put down per transaction in derivatives is roughly 3 times the value of an equity transaction.