JSE is world's largest SSF market

[SimonPB]

http://www.moneyweb.co.za/mw/view/mw/en/page66?oid=146633&sn=Detail

[dimitrius]

This is a major problem for share ownership. With more investors, including company directors, choosing ssf's over normal ordinary share purchases, liquidity and share value will suffer. As far as I'm concerned, company directors should be banned from buying ssf's in their own companies. They should put their money where their mouths are for the long term. If people are willing to rather buy ssf's instead of shares, money is diverted away from shares, and into an instrument that adds no value to the share price. How will they make money on a share price that has no activity due to money going into ssf's instead of the ordinary. I have no problem with a little speculation, but at these levels, it's ridiculous. The only guys who win are the brokerages. Just like SFM.

[Abundant_Lifest]

What does this mean for the JSE Ltd. Does this imply higher prifits and a bull run for the shares coming?

[SimonPB]

Dimitrius, you're wrong. Every SSF contract is worth 100 shares, and those 100 shares have to bought or sold every time the contract is bought/sold. So in fact the massive increase in SSF trade directly leads to the increased trading volume on the JSE.

As for directors, one can't stop anybody from doing something, and as mentioned above it still leads to the volume in the underlying share.

[#5]

There is one issue that I have with the increase in ssfs (and Simon, please feel free to correct me if I'm misguided), but surely the increase in leverage as a result of the widespread use of such derivative instruments leads to an increased level of risk in the market generally? If everyone's climbing in on derivatives (and I'm one of them) and there is a bit of a sell off, stops will be triggered, leading to forced selling and panic setting in. Surely it will lead to an increase in volatility?

[SimonPB]

short answer = maybe. Long answer is that many people use SSF's in many different ways.