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JSE to allow investors to trade stocks - Online platform under development - Future plans include commodities exchange

Published:Wednesday | November 27, 2013 | 12:00 AM
Marlene Street Forrest, general manager of the Jamaica Stock Exchange. - File

 Marcella Scarlett, Business Reporter

The Jamaica Stock Exchange is creating an online platform that will allow individual investors to buy and sell stocks — a function now limited to stockbrokers — and is simultaneously developing the blueprint for a commodities exchange in a push for market diversification and growth.

The liberalised trading platform will not eliminate brokers, who earn fees from the trades they execute.

Investors will be allowed to do their own trades, but the transactions must be settled by a broker, according to JSE General Manager Marlene Street Forrest.

The decision to open up its trading platform to access by individuals is meant to drive business for the exchange beyond Jamaica's borders, Street Forrest told Wednesday Business.

The platform, on which work is ongoing, is being developed in collaboration with broker members. None of the brokerage houses to whom Wednesday Business reached out for comment was willing to discuss the project and its implications. All queries were redirected to the JSE.

Street Forrest said since the global financial crisis in 2008, investors have been shifting from total reliance on information feeding from brokers and securities dealers toward a 'do-it-yourself' mindset.

"It is important that as a business, you see what is coming down the pike - be aware of what is happening in the market," said Street Forrest, "So the question is how are we going to get the knowledge so that all parties can align business strategies for a good investment climate?"

JSE, which listed its ordinary shares earlierthis year and is answerable to shareholdersbeyond its broker members, has become more aggressive at executing plans to grow its operation. Its last initiative was the launch of a bond trading platform, which as of this week has two listings - the AFS 9.5 per cent unsecured short-term notes, and the JAMT fixed and floating secured notes.

Before that, JSE launched a USD-Denominated Market, but two years later, the index still has a single listing - Proven Investments. Street Forrest said the JSE is working on a programme aimed at driving business to the USD Market through the introduction of depository receipts.

That, she said, requires amendments to the stock exchange rules and expansion of the exchange's registration services.

In further diversification of the JSE's operations, an agriculture commodities exchange is also in the works.

"Given the fact that there must be greater focus on agriculture to deal with our current economic dilemma, we will be utilising our trading and settlement platform for commodities, so there might pretty soon be an agricultural exchange," she said.

Access to the new online platform for investors will be free of charge, at least for now. To trade on the exchange, however, the investor will have to be validated by his or her stockbroker - the JSE has licensed 11 brokerage houses - and must have a valid Jamaica Central Securities Depository (JCSD) account.

The respective broker's system will be updated with all online transactions executed by clients. For settlement of the transactions, the investor is required to make prior arrangements with the respective broker.

Street Forrest says the trading platform will allow investors to enter and track the status of their orders and trades. Additionally, investors will be able allowed to view details of their online trading portfolio as well as review updates on their holdings in the JCSD.

She said all orders processed online will be subject to current market rules, including those for clearing and settlement of trades. Settlement is on a T+3 cycle.

Orders submitted outside of the regular trading hours will be accepted by the Online Trading Server and processed when the market opens for regular trading, which is weekdays 9 a.m. to 1 p.m.

"When an order is done online, it will be routed to the online trading server that will pre-validate the order. The order is then routed to the respective broker system for further validation," said Street Forrest.

"The broker system in turn will return the result of the validation to the Online Trading Server, which then submits the order to the trading platform, assuming the validation went well," she said, explaining the process.

"The investor will be notified when the order is queued and executed. The broker's system will also receive similar confirmations."

Trading representatives at the stockbrokerages will also be able to monitor and manage the orders in the trading system on behalf of the investors," Street Forrest adds.

She said the platform is both meant to increase the investor base, as well as interest and activity in the market. It is being developed jointly by the JSE and participating brokers.

The date on which the system will go live is still to be finalised.