CXN to make late-January debut
Published:Sunday | January 2, 2011 | 12:00 AM
Sabrina Gordon, Business Reporter
An electronic trading system that will allow for real time simultaneous trading of stocks across Jamaica, Barbados and Trinidad and Tobago stock exchanges is to be launched this month, two decades after it was first mooted.
"Everything is now in place," Marlene Street-Forrest, general manager of the Jamaica Stock Exchange told Sunday Business.
With this system, investors across the three territories will be able to buy and sell equities directly, instead of going through a home territory broker as previously obtained, and settle the transactions through a bank of their choice.
Previously, there was an agreement to have a regional settlement bank, Scotiabank, but that deal fell through.
"It was just a simpler option at this point," said Street-Forrest.
"Instead of a settlement bank, each member dealer will have to make arrangement to get their transaction settled either with Bank of Jamaica, for example, or any other commercial bank of choice," she said.
The proposal for a regional trading platform was initially raised in 1989, then again in the 1990s during ongoing discussions for a Caribbean Single Market and Economy, but it was not realised.
Three years ago, the idea was again brought to the fore in subsequent investment and capital-market conferences.
Work continued on the establishment of the system, the Caribbean Exchange Network (CXN), now set to be launched in the last week of January, just around the time that the JSE will be having its 2011 capital-markets confab.
And as for brokers polled, the CXN is seen as a welcomed move.
"As stockbrokers or member dealers and capital market raisers, we should look forward to the day when potential initial public offerings can be made easier for our Caribbean neighbours to invest in, and this will be one of the many avenues that the CXN will provide," said Mark Croskery, chief executive officer of Stocks and Securities Limited.
"The CXN will lend itself to a more dynamic market, where investors have easier access to investment opportunities across a wider variety of stocks regionally, expanding the whole notion of diversification," concurred Donette Johnson, senior equities trader at Jamaica Money Market Brokers.
The CXN will create a regional stock market of in excess of 100 listed securities, including mutual funds, stocks and bonds.
On the Jamaican exchange alone, there are 44 listed companies, with market capitalisation of $560.9 billion.
Street-Forrest, however, would not disclose how many member dealers have already signed onto the CXN platform,but it will not be one that all will be compelled to join.
Once a willingness is indicated, said Street-Forrest, the member dealer will be required to register with the various securities regulators in the three jurisdiction as well as establish a working relationship with a local commercial bank to settle transactions.
While available only to the big three territories in the first instance, the plan is for brokers in other countries to participate in the future; though no timeline was given.
The CXN will allow brokers in each jurisdiction to access all the stock within the region from their desks, irrespective of where they are. But they 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, with the security being held in the TT central securities depository.
"With the CXN, Trinidad and Tobago brokers, for example, would be able to transact business as if in Jamaica," said Street-Forrest.
Transaction fees will be charged based on the fees applicable in each market.
"If a CXN broker buys, say, Salada shares which are listed on our exchange then the fees that are applicable are those charged in our market," said Street-Forrest.
But according to brokers, it will take some time before more robust cross-border trading is realised through the CXN.
"Initially, I do not foresee it being an overnight driver of trading between markets, we are cautious in this regard. However, once brokers become familiar with the market and experience is gained we anticipate seeing an uptick in trading," said Croskery.
"It gives easier access, certainly, for our local investors as brokers will be able to execute orders themselves instead of routing orders through another broker resident in the other territories," remarked Johnson.
With the CXN allowing for direct real-time trading of cross-border stocks, the need for cross-listing on different exchanges will essentially be eliminated.
But delisting is not an immediate consideration for any cross-listed stock.
On the JSE, there are only three cross-listed companies: First-Caribbean, Guardian Holdings and Trinidad Cement Limited.
A handful of local companies like JMMB, Supreme Ventures Limited, National Commercial Bank and GraceKennedy Limited are listed on the TTSE.
JMMB is the only Jamaican company traded on the Barbados exchange, after GraceKennedy announced its delisting, citing limited activity in the stock.
As with the current market, the traditional blue-chip companies are expected to be the most attractive in all markets, including operations like Neal and Massy Holdings, ANSA McAL, and Sagicor, which do business in multiple jurisdictions.