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Stabroek News

A Caribbean Stock Exchange ­ charting the way forward
published: Saturday | January 28, 2006

Keith Collister, Contributor


With a regional stock exchange, companies listed locally could be automatically listed across the Caribbean. Doris Berry (second left) inserts the Mayberry's strip during the listing ceremony at the Jamaica Stock Exchange on Harbour Street on April 21, 2005. Looking on is Christopher Berry (left), Chairman/CEO, Mayberry Investments, Roy Johnson (right), Executive Chairman of the JSE and Mark Berry of Mayberry Investments Limited. - NORMAN GRINDLEY/DEPUTY CHIEF PHOTOGRAPHER

JAMAICA STOCK Exchange (JSE) executive chairman Roy Johnson says there is a need for clear action to move the issue of a Caribbean Stock Exchange forward.

In his opening address to the participants of the inaugural regional stock market conference held at the Half Moon Hotel in Montego Bay last week, Mr. Johnson said the conception and birth of a Caribbean Stock Exchange has experienced an interminable gestation. He addressed squarely the practical hurdles which militate against having one single Caribbean Stock exchange, the chief of which is the fact that the established Exchanges are not likely to apply for voluntary redundancy.

CHARTING THE WAY FORWARD

The morning session showed graphically the difficulty the region's Exchanges had in meeting Mr. Johnson's call for the participants in the Conference to leave with a clear road map and time-table for the implementation of a Caribbean Stock Exchange. Involving the General Managers of the Jamaican, Trinidadian, Barbadian and Eastern Caribbean Stock Exchanges, moderator Dr. Trevor Munroe in his opening comments echoed Mr. Johnson's concern about the shortage of Exchange applicants for 'voluntary redundancy'.

A VIEW FROM THE BARBADOS STOCK EXCHANGE

Mr. Marlon Yarde, general manager of the Barbados Stock Exchange, argued that the current reality was that there were seven small separate Caribbean stock exchanges - Bahamas, Barbados, Eastern Caribbean, Guyana, Jamaica, Suriname, and Trinidad & Tobago, with relatively high transaction costs, low liquidity, a relatively small number of listed companies, and a few securities dominating trading on an exchange, while legislation and trading rules varied across the region.

LIQUIDITY

In his presentation, Mr. Yarde stressed the key importance of liquidity. He argued that the best way to achieve improved liquidity was a common trading platform approach, with CARICOM-wide connectivity using state-of-the-art technology connecting local brokers (intermediaries) in the multiple stock markets through a single network. This would create a fair and well-informed market for financial securities, and ultimately an internationally competitive market. By interconnecting the stock exchanges of the region in this fashion, he believes one would be able to create a single regional capital market.

Issuers will still list on their home market, but brokers from throughout the region would be able to trade their shares through their local exchange. This removes the notion of a single exchange displacing the existing well established exchanges, while broadening the scope of operations of all exchanges as all participating exchanges will give their brokers access to the companies listed on each other's boards.

This would encourage more companies to list because of the cost-effectiveness of the process. When a company does an Initial Public Offering (IPO) and subsequently lists on their local exchange, they now have the opportunity of making the IPO to the entire region because they know that when they list brokers throughout the region can trade their shares wherever they are in the single regional capital market.

For Mr. Yarde, stock market integration meant :

"Stock market integration means that investors can buy and sell shares in those markets without restriction and that identical securities can be issued and traded at the same price across the markets after foreign exchange adjustment."

SETTLEMENT

Brokers will have a bank account with the settlement bank chosen through which settlement will be effected. Intra-regional settlement will be by the use of a commercial bank that has a regional presence or via all the participating Exchanges having a clearing/settlement account in the various regional central banks.

CROSS-LISTING DOESN'T NECESSARILY INCREASE LIQUIDITY

Mr. Yarde argued that once there is interconnectivity among the regional stock exchanges, there will be no need for the cross-listing of companies on different exchanges. In any case, he argued that there was a greater need for new product e.g. new listings. Mr. Yarde cited the example of Barbados in arguing that increasing cross-listing did not necessarily increase liquidity. Although the Barbados Stock Exchange now has 26 listed companies, only 20 are local companies, and liquidity still remains very poor.

TAKEN FROM THE FINANCIAL GLEANER, FRIDAY, JANUARY 27, 2006

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