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Stabroek News

BNS contracted as settlement bank for CXN
published: Friday | May 2, 2008

Sabrina N. Gordon, Business Reporter

General manager of the Jamaica Stock Exchange, Marlene Street-Forrest, in this April 4 Gleaner file photo with Phillip Armstrong (right), of Pan Caribbean Financial Services. - File

The securities de-positories in the three countries to be party to the Caribbean Exchange Network (CXN) have selected the Bank of Nova Scotia Jamaica (BNS) as settlement bank for regional stock market trades.

"The contract with BNS has already been signed and concluded," said Marlene Street-Forrest, general manager of the Jamaica Stock Exchange (JSE).

"A central agreement between Jamaica, Barbados and Trinidad and Tobago security depositories and Scotiabank Jamaica Limited has been signed for the provision of settlement services for the exchange."

Cash accoiunts

Typically, a settlement bank maintains cash accounts through which payment obligations associated with financial transactions are executed.

Street-Forrest said the details of the contract would not be disclosed until final approval of the CXN was handed down by the regulatory authorities in the three territories, but it will be left up to BNS, she added, to work out the logistics between its affiliates, BNS Barbados and BNS Trinidad, for the execution of the services.

The CXN is an electronic trading platform that, once operational, will create a single regional stock market of about 120 listed securities - including mutual funds, stocks and bonds.

The JSE, TTSE and BSE will continue to exist, however, as stand-alone entities. In Jamaica's case, the CXN is expected to have a special desk at the exchange's Harbour Street offices, but the JSE will continue to be the watchdog of its listed companies - as will the other exchanges.

"We are not creating a new market; just facilitating and ensuring improvement in all persons presently purchasing securities in other markets," said Street-Forrest.

CXN itself will have no regulatory powers in any of the markets, and will not usurp the role of the securities commissions in the territories, the JSE executive had also said last year. The CXN trading platform and support infrastructure have been in place since 2007, and the network was expected to be operational by last October.

But regulators have not completed their review of the proposed CXN trading rules and operational framework, derailing the timetable.

Through the network, brokers in member countries will be able to trade securities on all three exchanges, in real time, as if they were operating domestically.

From a practical standpoint, investors will be able to buy cross-border stocks 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.

That exposes the investor to foreign exchange risk.

Up and down risk

Street-Forrest in an earlier interview said CXN rules state that if within the harmonised T+3 cycle for settlement of trades the value of the currency shifts, the transacting parties will bear the up or down risk.

Scotiabank's role is conduit for the payment remitted by buyer to seller.

Provisions for the CXN are the final stages, awaiting only the final stamp of approval from securities regulators in the three countries.

"All the constitutive documents have been submitted and we now await the go-ahead from the regulators," said Street-Forrest, who is now in charge of commercial operations at the JSE following reorganisation in March.

"The authorities had indicated that they would have met in order to give a response within the month of April."

But last week, George Roper, the acting executive director of Jamaica's Financial Services Commission, said he and his colleagues were still reviewing the documents.

"Once that review is complete, the regulators will advise the respective exchanges of their position on the documents - whether they are approved or need further changes," said Roper.

"The FSC is eager to see this process advanced and has been working with the other regulators and the exchanges to ensure that all concerns are addressed before the start-up of the CXN."

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