The Jamaica Stock Exchange on Harbour Street, Kingston, is to be one of three members of new Caribbean Exchange Network.
Lavern Clarke, Business Editor
The new Caribbean Exchange Network (CXN) that will, initially, harmonise three of the largest stock markets via a common trading platform is now about two to three months to implementation.
"It's the first we have reached this stage," said Marlene Street-Forrest, general manager of the Jamaica Stock Exchange (JSE) and spokeswoman for CXN.
In the design and planning phase for years, the CXN will be rolled out, best case, at the bottom of the third calendar quarter, or at the top of the fourth in October, with about 120 listed securities.
"The connectivity is in place; the infrastructure is in place," said Street-Forrest, referring to the trading platforms and settlement arrangements. "We are ready."
But that timetable is still dependent on how quickly securities regulators in Jamaica, Trinidad and Barbados sign off on the enabling documents and agreements on which they have asked for clarifications.
Answers are in the CXN document
Street-Forrest said Wednesday the additional answers sought were embedded in the CXN documents and the exchanges would have, within a week, responded with the clarifications.
Last week, the CXN members - the JSE, Trinidad and Tobago Stock Exchange Limited and Barbados Securities Exchange Inc. - were wrapping up negotiations to "fine-tune arrangements" with the bank that would be the conduit for the settlement of trades across borders.
Street-Forrest would not name the institution, but Sunday Business understands that it is a top commercial bank in Jamaica of Canadian parentage, with operations in the three markets.
More urgent is satisfying Jamaica's Financial Services Commission (FSC), the Barbados Securities Commission and the Trinidad and Tobago Exchange Commission about some of the trading rules under CXN.
Investors will be able to buy stocks in any of the three countries via local brokers, but must transact the business in the currency of the home market of the listed security - for example, a Jamaican buying a TT stock, would have to settle in TT dollars.
In the absence of a Caribbean monetary union, implied in that rule is an element of risk.
Street-Forrest said Wednesday that the CXN rules clearly state that if within the harmonised T+3 cycle for settlement of trades the value of the currency shifts, then the investor will bear the up or down risk.
"Any foreign exchange movement is the client's responsibility," said Street-Forrest in an interview on the status of the CXN plans.
"We will be indicating to regulators that it is there; that it will be in the broker-client agreement."
Alongside that agreement, the exchanges have drafted CXN access rules, tradingagreements and have agreed depository arrangements for securities to be held electronically.
The regulators, however, also wanted clarification as to whether or not the CXN rules would supersede domestic provisions.
Street-Forrest said it is explicitly stated in the documents that in areas where the exchanges have not fully harmonised, the home rules apply, with 'home' being the market where the stock is listed.
The securities commissions were also unclear following their review of the documentation whether CXN was a legal entity with regulatory powers.
"It is not," said Street-Forrest. "Regulation will be by the SECs of the region."
Further, she said, each securities regulator would have the power, under the CXN rules, to enquire about trades in any jurisdiction and that brokers would be so advised to ensure compliance.
In fact, once the regulators are satisfied, a series of workshops with brokers, listed companies and other interest groups is planned, ahead of the September or October launch of the CXN.
Structurally, the regional exchange will not have its own secretariat, at least not right away, but will have dedicated desks within the offices of member exchanges and, eventually, have a virtual presence via a web portal.
"The intent is to have everyone having access to information and trading and market data," said Street-Forrest, in much the same way that the JSE now operates.
The second phase of the CXN is to broaden membership to other country exchanges, but that timetable is dependent on how robustly the markets perform under the CXN. Street-Forrest was confident, however, that the wider options both in the number of listings and the markets represented would act as a pull for investors.
"This should energise the market," she said.
Street-Forrest was reluctant to reveal the budget for creating the CXN, saying the only costs not shared between the three exchanges were the investments in upgrading IT and infrastructure.
"All legal, consultancies, travel costs, etc. were borne equally," she told Sunday Business.