THE ISSUE: BSE working on global market
The fluctuating and sometimes sparse nature of activity on the Barbados Stock Exchange has concerned market actors and company executives for some time.
If that was not bad enough, then came the economic recession and financial crisis of 2008. An already difficult securities trading environment became even more challenging.
So what is the solution? For some, including Minister of Finance and Economic Affairs Chris Sinckler and Barbados Stock Exchange (BSE) general manager Marlon Yarde, a major part of the answer is the establishment of an international securities market (ISM).
By the BSE’s definition, an ISM is “a market for the listing and trading of securities of issuers incorporated in Barbados that would otherwise be listed and traded on other exchanges around the world”.
In his August 2011 Financial Statement And Budgetary Proposals, Sinckler spoke about the important role this mechanism could play as an extension of the island’s plans to boost earnings from the international business and financial services sector.
Noting that the idea of a Barbados ISM dated back to 1991, the minister said: “The international securities market has the potential of creating a number of benefits for the country and the international business community, further solidifying Barbados as an international business destination.
“Though long in coming, the establishment of the international securities market is well on its way to becoming a reality with the completion of a business plan and a draft memorandum of understanding for consideration by the Ministry of Finance. I will therefore, in the very near future, be approaching Cabinet for its support of this initiative.”
Earlier that same year, in April, Yarde was also advocating the push towards an ISM. He called it the missing pillar in the island’s international financial centre.
“We must not rest on our laurels and allow this opportunity to pass us by and fall in the lap of another country in the region, only to later reflect on the brilliant idea we once had and postulate on the ‘what if’, the ‘had we done this’, and the ‘what could have been’. The time to act is now,” he urged.
As conceptualized by those involved, the idea was to “develop in Barbados an international securities market similar to other successfully operated international securities markets worldwide”, most notably those operated by the Bermuda Stock Exchange, Cayman Islands Stock Exchange, and the Channel Islands Stock Exchange.
It was also pointed out that ISMs had spurred increased activity and development in the international business sectors of their jurisdictions and their economies as a whole.
In what on the face of it was a sign that the authorities considered the stock market, ISM and related issues vital to the island’s economic fortunes, Sinckler addressed the issue again in this June 2012 Budget.
“The capital markets play a crucial role in economic development, facilitating the movement of capital from savers to investors which serves to drive economic growth and development. Investment as opposed to consumption is the ultimate driver of growth in an economy. The future growth and development of the Barbados economy is contingent on adequate funds being available and invested in the key areas that will drive the economy,” he said.
Earlier this year the BSE also revisited the issue in the context of insufficient local trading activity and a still depressed economy.
“We are well aware that activities in the wider marketplace tend to be mirrored in the local capital market. However, we maintain that while we must be prepared for any negative impacts, we must, at the same time, continue to evolve and position ourselves in such a way that we are able to take
advantage of any opportunities that may become available in the future,” it said in its 2013 first quarter report.
“Thus, we continue to press ahead with our international securities market initiative, which would facilitate the listing and trading of foreign securities of companies domiciled abroad that are seeking to establish a physical presence in Barbados, as well as securities owned by international business companies that are currently operating on the island,” the agency added, noting that the relevant rules had been submitted to and were being considered by its regulator the Financial Services Commission.
The BSE’s most recent report on market performance, its 2013 half-year document, indicated why officials might be so keen for the ISM.
“Total trading activity for the first half of 2013 compared to the activity which occurred for the corresponding period in 2012. Total trading volume increased by 19.11 per cent, while total trading value increased by 3.15 per cent.
The put-through market recorded the largest increases of 1168.58 per cent and 949.53 per cent in terms of volume and value, respectively. There was no trading on the junior or block trade markets for the first half of 2013,” the BSE report noted.
“There were 12 extraordinary transactions pursuant to the takeover of Republic Bank Barbados Limited by Republic Bank Limited as compared to one extraordinary transaction pursuant to a takeover (AMCL Holdings Limited’s takeover of ANSA McAL Holdings Limited) for the corresponding period in 2012,” it explained.