Capital Markets Innovation & Disruption: SA Trade Connect Insights

At this year’s Johannesburg Stock Exchange SA Trade Connect conference in Cape Town, one theme cut through every panel discussion. The market environment has changed at both a macro and micro level, and some of these shifts will be permanent. Industry experts discussed how to navigate fragmentation, volatility, extended trading hours, and AI to accelerate capital markets innovation.

We’re operating in a world defined by persistent volatility and rapid structural shifts. Geopolitical tensions, stretched global tech valuations, sticky inflation, and a weaker US dollar have combined to produce sharp price swings. At the same time, markets have become more “wired” than ever — real-time, data-intensive and increasingly automated.

Volatility, as one panellist put it, used to be episodic, but now it feels like the base case.

Volatility: Stress Test or Strategic Opportunity?

The panel debated whether markets are culturally and operationally prepared for sustained turbulence. There was broad agreement that today’s volatility differs from previous cycles. It’s faster. More interconnected. And amplified by technology and cross-border asset flows.

For exchanges and sell-side firms, volatility undeniably brings higher volumes and, therefore, revenue opportunities. But it also strains infrastructure. Message traffic is exploding. Data volumes are growing exponentially. Surveillance systems must detect anomalies in milliseconds, not minutes.

Legacy technology came under scrutiny. Sell-side firms are under pressure to maintain ageing systems while trying to modernise. Exchanges and post-trade service providers are focused on resilience and capacity planning while grappling with challenges such as moving to shorter settlement cycles and extended trading hours. The buy-side, meanwhile, face execution challenges when trading fragmented, volatile markets.

Volatility is manageable, but only with deliberate investment in infrastructure, automation and risk management. And market participants should assume it’s here to stay.

Fragmentation: Healthy Competition or Hidden Cost?

Turning to market structure, the discussion explored liquidity fragmentation. In South Africa, conversations often centre on comparisons between the JSE as the primary exchange and A2X’s secondary listings marketplace. But that’s a narrow view of fragmentation and globally it has evolved far beyond that.

In Europe and North America, liquidity is highly dispersed across lit venues, dark pools, OTC, and internalisation. It’s a very blended picture and has moved far beyond the debate of whether “fragmentation is good or bad”. The question is whether participants have a clear and affordable view of total addressable liquidity and how they access it.

Data costs, infrastructure duplication and post-trade complexity are often underestimated in these debates and have led to some initial consolidation following MiFID I in Europe (e.g., the closure of Burgundy in the Nordics or the acquisition of Turquoise by LSEG). However, since then, the landscape continues to evolve and despite driving operational complexity for market participants, it also creates opportunity for better execution quality.

For emerging markets like South Africa, the lesson may be balance. Competition can sharpen pricing and innovation, but transparency and efficiency must remain intact.

Always-On Markets: Inevitable or Overhyped?

If FX trades 24×5 and digital assets 24×7, are equities the anomaly? Globally, there’s clear momentum toward extended hours and shorter settlement cycles. The move to T+1 settlement in the United States has already reshaped funding, failure management and operational processes.

But extended trading raises difficult questions. Does it encourage greater trading volume — or dilute liquidity across longer hours? Does it serve institutional investors, or is it largely retail-driven? Given the size, liquidity and global appeal of the US equity, it’s not surprising that it’s at the forefront of this change. In the Asia-Pacific, Blue Ocean offers 24×5 trading of US equities and is experiencing growing popularity, while NYSE, Nasdaq and CBOE have all made recent announcements that they intend to introduce near 24-hour equity trading. However, emerging and regional markets will have to carefully consider whether running extended market hours will really generate additional business or just add to cost and complexity, at least in the short term.

For South Africa, where equities still largely settle on T+3 (with plans to move to shorter settlement being debated), the panel was pragmatic. It’s hard to imagine truly “always-on” markets without faster settlement. Extended trading without T+1 or beyond, could amplify settlement risk.

Sequencing matters. Infrastructure and coordination must lead ambition.

AI: From Hype to Competitive Edge

If one theme felt less theoretical and more immediate, it was AI. With capital markets increasingly electronic and algo-driven, some expect market data volumes to double within the next two years. Firms will need advanced tools to manage and analyse all this information as trading is increasingly dependent on quantitative modelling. AI is already playing a key part as firms accelerate initiatives to leverage the productivity it can provide. AI tools are increasingly prevalent in areas such as surveillance, anomaly detection, execution optimisation, client analytics and portfolio construction.

The industry’s long-standing data challenges of inconsistent formats, quality issues and sheer scale, haven’t disappeared and are perhaps even more important in building and running accurate models as AI adoption grows. However, data quality is an area where the panel expect AI to offer help, ultimately reducing the need for data scientists but enhancing the role of quants to pilot the tools at their disposal.
One point everyone agreed on is that AI adoption will accelerate rapidly as firms become more comfortable with its potential. How big a role it will play in trading decisions in the near term will depend on whether regulators can become equally as comfortable.

Retail: The Next Growth Frontier?

Retail participation surged globally during COVID and then cooled. Yet digital markets (particularly crypto) demonstrated the power of frictionless onboarding, 24/7 access, and real-time transparency.
Traditional equity markets are learning. Fractional shares, mobile-first platforms and improved education initiatives are helping broaden participation. Retail is where the trends discussed on this panel come together; extended trading hours, AI tooling, access to different liquidity pools and financial products can all drive growth in retail volume. But panelists were careful: gamification without guardrails risks undermining trust.

The opportunity in South Africa is clear. Younger investors are digitally native. They expect intuitive tools, transparent pricing and seamless experiences. The challenge is attracting them without increasing systemic risk.

The Big Picture

Across all topics (volatility, fragmentation, extended trading, AI and retail), capital markets are adapting, instead of standing still.

For South Africa, the question is how deliberately, strategically and collaboratively the industry chooses to respond to change. In volatile times, as countries compete for capital, South Africa’s financial community will need to think hard about how to create sustainable competitive advantage.