ON THE RIGHT: Steps to access global market
Founded in 1971, The Bermuda Stock Exchange (BSX) has been in existence for 40 years. The BSX was established to provide market support for shares in Bermuda domestic equities and fixed income.
The BSX operates a fully electronic/ integrated trading, clearing, settlement and depository. Over 600 securities are listed with a market capitalization (excluding listed investment funds) of over $300 billion. The BSX pays a significant role in Bermuda’s domestic economy with the market capitalization of domestically listed securities being approximately 25 per cent of the gross domestic product of the country.
Foreign investors are active in the domestic market and in the international securities that are listed on the exchange.
Decades ago, the Bermuda government enacted legislation which prevented foreign ownership stakes in domestic companies exceeding 40 per cent of the shares in issue. Over the last five years, interest in the domestic market has grown to such an extent that many large BSX domestic issuers reached their statutory foreign ownership levels.
Realizing the impact this had on price discovery, capital raising and market liquidity, the BSX worked closely with the Government to seek a solution.
In the summer of 2012, the Bermuda government made amendments to law so that domestic companies could be free of foreign ownership restrictions if they were listed on the BSX and operating within specified industries.
On the international side of our business, all other products are driven from external sources and have international institutional support. Accessibility to the exchange is something that the management of the BSX is very focused on at present. We are seeking to expand the ability for market access by international investors.
I believe that at the BSX, we have taken careful and deliberate steps to be part of the global capital market framework by leveraging our unique strategic physical location (nestled between two of the largest capital markets in the world) and supporting products that play to the strengths of Bermuda’s international business platform.
We have been innovative and entrepreneurial in approach since our inception and that is now coded in the organization’s DNA, such that we will continue to seek new applications for our exchange and the jurisdiction.
In respect of the global exchange space, I believe there will be a place for regional and niche-focused markets and exchanges. I believe that the type of work we are doing in Bermuda and at the BSX clearly lends itself to becoming more and more important and interconnected.
From a macro perspective, the main challenge we see today is the continued headwinds caused by global economic conditions.
Although the Bermuda domestic market is small, the country’s international business sector is significant and as such reacts to global economic conditions which therefore impacts domestic market sentiment. That said, we are beginning to see green shoots.
Two areas on which we remain keenly focused are keeping up with regulatory/market changes occurring outside the jurisdiction, which could affect our business and our clients, and continuing to deepen the accessibility of our market to international participants.
• Greg Wojciechowski is president and CEO of the Bermuda Stock Exchange.