Johannesburg — WITHIN a year the Bond Exchange of SA (Besa) will have a better credit rating than SA, according to Garth Greubel, CE of Besa.

This is due to Besa's joint venture project with Nasdaq OMX, called BondClear. Bonds traded through Besa will be cleared by Nasdaq OMX and leverage off that company's balance sheet. This means that local and international debt traders should be attracted to Besa because of its lower risk profile.

"We will move from a BBB+ rating to AAA and pierce the sovereign ceiling," Greubel said. "Nasdaq OMX has a better rating from a credit and a sovereign point of view."

Greubel hoped BondClear would be ready by the beginning of the second quarter of next year. It would not only expand the capacity for local traders to trade with foreigners, but it would also allow smaller banks to utilise the local debt market more effectively and hedge in the underlying bond market.

Clearing in the local market has typically been done bilaterally between the members of Besa but with the introduction of BondClear, trades will be cleared by the new central counterparty that carries the risk. Besa will be able to launch interest rate derivatives once BondClear is in place.

The deal with Nasdaq OMX went ahead because Besa's rights issue was passed by 98% of its shareholders at its recent annual general meeting. This meant the business was recapitalised with the bulk of the money raised, about R80m, going into BondClear.

Henrik Paulsson, a senior vice-president of Nasdaq OMX, said his company saw "great potential for growth" in SA. He noted the general growth in SA's economy, Besa's high and increasing volumes and the fact that there were still gaps for infrastructure to be developed.

Nasdaq OMX represents the biggest exchange grouping in the world and its derivatives market is the third-largest in Europe. Its services are used in 60 markets in 50 countries. "The exchange world is one of consolidation. You need that for survival. Africa is slightly behind the curve," Paulsson said.