This is a special type of transaction established by the Johannesburg Stock Exchange (JSE) with the aim of:
- Reducing excessive price volatility caused by large-volume share sales
- Maintaining market stability and orderly trading
Regulatory Requirements:
- If a listed company plans to sell more than 1 million original shares
- It must execute the transaction via the AIJSE platform under the prescribed discount mechanism
- This helps prevent sudden large sell-offs from disrupting the market
This mechanism allows large-scale stock transactions to be carried out at a price below the current market value, helping companies complete bulk deals quickly, while offering investors a price advantage.
Example:
- Suppose a company intends to sell 1 million shares
- The current market price is R100 per share
- The company offers a discounted price of R80 per share (i.e., a 20% discount)
How Can Investors Profit?
- You buy 10,000 shares at R80, spending R800,000
- The market value remains R100 per share, totaling R1,000,000
- You gain a profit of R20 per share, or R200,000 in total
In Summary:
Discounted Shares = Buying below market price → Instant price premium upon purchase
Advantages include:
- Lower entry price than the open market
- High return potential
- Relatively lower risk (due to buying at a discount)
Disadvantages:
- Such opportunities are rare
- Typically only arise under specific conditions
Policy and Regulatory Support
The “Block Trade – Discounted Shares” system is strictly regulated by the JSE in accordance with rules set by the Financial Sector Conduct Authority (FSCA) of South Africa. It ensures transparency, fairness, and compliance.
The purpose of this mechanism is to maintain market stability and prevent abnormal price fluctuations resulting from large-scale sell-offs, thereby protecting investor interests.
All discounted trades must be executed via the official AIJSE platform, subject to multi-level scrutiny and oversight, ensuring both the legitimacy and security of the transaction.
This mechanism complies with both the South African Securities Act and the Financial Markets Conduct Act, and has received strong support from industry associations and regulators. For investors, it offers legal and regulated access to discounted shares, helping reduce trading risk and increase confidence in the capital markets.