Regional capital market moves forward

PROGRESS TOWARDS a regional equities market got another boost on July 4, when the Securities Exchange of Barbados went live with its electronic trading platform and its central securities depository.

The configuration in Barbados is identical to and compatible with the system in use in Jamaica. Both employ the Horizon electronic trading system (re-named Sunrise in Jamaica) that complements the Equator automated clearance and settlement platform of the central securities depository in each country.

This would make it possible for the stock exchanges of Jamaica and Barbados to communicate with each other electronically. However, JSE General Manager Wain Iton and his counterpart in Barbados, Virginia Mapp are quick to point out that cross-border electronic trading is still some time away.

"In the first place," said Mrs. Mapp, "in Barbados, we have to focus on ironing out all the bugs in our local trading before we could even begin to think about hooking up with any other regional exchange." Nevertheless, she believes that cross-border electronic trading will take place before the end of the year.

Harmonisation

In supporting this view, Mr. Iton said that the Barbados launch was an important milestone in the five country, Inter-American Development Bank (IDB)-funded Regional Capital Market Harmonisation Project, which commenced in 1993. The countries participating in this project are Bahamas, Barbados, Jamaica, Trinidad & Tobago and the Dominican Republic. The principal objectives are to modernise the stock exchanges in each of the participating countries, bringing them in-line with G-30 international standards, to harmonise the regulatory requirements and to facilitate Caribbean capital market integration.

On May 5 this year, Bahamas launched its International Securities Exchange with trading in nine listed stocks by two member brokerage firms. "We are now up to 17 listed companies," advised Keith Davies, the exchange's chief legal & compliance officer. However, Davies said that trading has been very light, averaging around ten trades per day.

Bahamas has employed the same Horizon electronic trading system but has opted for the NT-based, Depository 2000 system to drive their central securities depository. This system is compatible with the Equator system being used in the other countries.

Lyndon Murrell, I.T. officer at Trinidad & Tobago's Securities Exchange said that their central securities depository will become operational with the Equator system on or around October 31 and they will follow with the Horizon electronic trading platform about three months later, or by the end of the year.

The Dominican Republic has not yet established a stock exchange.

Next steps

Quite apart from de-bugging systems and perfecting regional electronic communication, several substantive issues, none of which is insurmountable, remain to be worked out. An important one, Mr. Iton said, is agreeing how regional settlements and the delivery of cash and securities will be carried out.

JSE Chairman Roy Johnson also believes that it is necessary to increase human communication throughout the region as our trading and settlement systems become more responsive to each other. "The fact is, brokers, investment advisors and other securities personnel know little of each other throughout the region. We need to create opportunities for meeting and interacting with each other so that the level of confidence among us will increase, even as we seek to increase the level of business we do with each other."

Enid Bissember of CARICOM's Economic Intelligence & Policy Unit said that there is an urgent need to develop a regional capital market database as well as a regional index. Ms. Bissember's duties include conducting a public education and awareness programme across the region to increase investors' knowledge of the regional capital market and of the functions of a regional stock exchange. Part of this work includes the publication and distribution of four booklets, the first two of which have already been published: