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How to buy and sell shares on the JSE

Previously we defined what shares are and how the JSE was formed during the industrial formative stage in South Africa. In this section we look at how one goes about buying and selling shares on the JSE and the procedure involved.

To buy or sell shares on the JSE market, an investor must go through a stockbroking firm that is registered with the JSE. Using a stockbroking firm that is registered with JSE offers some protection to clients because brokers have to comply with certain rules and regulations as set by the JSE from time to time. A full list of JSE stockbroking firms is available on request or on the JSE website, www.jse.co.za.

Before you engage a broker, you need to decide whether you want a stockbroker who will merely carry out your instructions to buy or sell particular shares, or whether you want one who will give you advice on how to invest. This issue will be dealt with greatly in the next article.

You need to open a share trading account with the stockbroker. Unless you already have a share portfolio with a stockbroker, you will have to deposit money in an account from which your stockbroker can pay for the shares you want to buy. The minimum amount required varies from broker to broker but a minimum of R 10 000 serves as a guideline for a man in the street.

Once you have money in place to buy shares, you and/or your stockbroker need to decide which shares to buy, and at what price. You may decide to buy certain shares at their current market price, or you may authorize your broker to buy certain shares for you at a certain price. Your order   to buy a particular share will be matched when it is linked in the JSE trading system (JSE SETS) to a seller who is willing to sell you the shares you want, at the price you want.

Once your order has been matched in the market, it can take up to five days for the deal to be concluded. Your stockbroker will have to transfer the money for the shares to the seller's stockbroker and the seller's stockbroker will have to transfer the shares to your broker. When you want to sell your shares, the process is the same. Your broker will put an order into the market and you will only be able to sell when a buyer is found for your shares.

Once your stockbroker has bought or sold shares on your behalf, you will be sent a broker's note showing the number of shares bought or sold, the amount you must pay, or will receive, the brokerage charges and other transaction charges you must pay.

You must keep this note for your records as it serves as proof of what you have bought or sold.

In the past, when you bought shares you would be issued with a paper share certificate, which had to be kept by or handed back to your broker when you sold your investment, but since the introduction of an electronic share register, this is no longer the case.

Most stockbrokers send monthly and quarterly portfolio evaluation statement to their clients.
 
In the next article, we will look at the role of Stockbrokers and how to select them.

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