Allan Gray has warned of wild swings in share prices on the JSE if the bourse follows through on its proposal to do away with trading updates as part of reducing listing costs.The JSE is making efforts to attract and retain listings after a torrid decade marked by a mass exodus of companies from the exchange.The JSE last year issued a consultation paper for market participants to opine, particularly on proposals to remove trading statement provisions and the removal of the disclosure of HEPS as a listing requirement.HEPS must at present be included with the annual financial statements, and therefore issuers also incur the additional cost of assurance over the figure.The exchange said it has noticed that many issuers calculate HEPS only for JSE regulatory purposes, despite requiring financial staff resources to prepare the figure. The metric is largely seen as a key measure of profit in South Africa.One of the considerations put on the table is the bourse possibly relooking at the wording of trading statements and whether it is more sensible to increase the trigger percentage to, say, 30% or 40% for companies to issue trading statements.Under the present regime, they must publish a trading statement as soon as they are satisfied to a reasonable degree of certainty that their financial results for the upcoming period will differ by at least 20%. The JSE’s paper said this places an obligation on issuers to have reporting procedures for trading statements over and above those required for the actual financial results.Allan Gray, which has more than R750bn in assets under its management, said both HEPS and trading updates are fit for purpose.The asset manager said that while the decline in JSE listings has been widely debated, it believes this decline is largely driven by structural challenges and global trends rather than financial reporting costs for the average issuer.Managing expectations“Trading statements play an important role in managing investor expectations and reducing the risk of large, unexpected share price movements that may lead to contagion,” the company said in its stewardship report.“While the JSE raised concern that its ‘reasonable certainty’ threshold is only met within 48 hours of reporting results for 10% of trading statements, we favoured investigating the drivers of these delays in the minority of cases (for example, company size or sector dynamics) rather than weakening provisions that function in 90% of cases.”Allan Gray, Africa’s largest privately owned investment management firm, also made a case for keeping HEPS as a key profit measure.“HEPS provides a simple and comparable view of a company’s ordinary trading performance. While we recognise that no metric is perfect and analysts will form their own view of a company’s ordinary trading earnings when conducting deeper analyses, in its absence, companies are likely to provide their own adjusted earnings measures,” Allan Gray said.“In our experience, these vary in definition, are revised frequently and tend to favour management’s view of performance.”The JSE has embarked on the biggest shake-up in a generation to rein in the flight of small-cap companies. Africa’s largest bourse has halved in size over the past two decades, which has curtailed trading volumes and slashed investment options.