Jul 2013 Financial News

TTSE chairman: SMEs inclined to list, but process is slow

Jul 04, 2013

It’s a slow process.

That’s how Subhas Ramkhelawan, chairman of the T&T Stock Exchange (TTSE), described the listing of small and medium enterprises (SMEs) on the TTSE.

Speaking on June 24 at his TTSE office, Nicholas Tower, Independence Square, Port-of-Spain, Ramkhelawan said SMEs have expressed interest in listing. However, other companies are sceptical to list, citing, among things, the TTSE’s requirement to share corporate information.

“Those things would take some time to work out because I am aware that there have been a number of enquiries (by SMEs to list on the exchange). To move from enquiry stage to execution stage, there is a lot of learning and unlearning by some of the SMEs in order to put virtually all of their information before the public,” Ramkhelawan said.

In the 2011/2012 budget, then Finance Minister Winston Dookeran announced plans to provide SMEs with the opportunity to be listed on the exchange to reduce their dependency on financing from banks and to expand T&T’s capital market.

Defining unlearning, Ramkhelawan said: “SMEs would have done things in a certain way before. When you come to an exchange, (there is) accountability, transparency, disclosure, making announcements about any material change, change of directors, directors who hold shares.

“There are a whole set of additional requirements that when you weigh the cost benefit of it, you, as an SME, would have to be convinced this is the way to go. It is clear there is capital to be raised on the exchange; it is clear that you can raise the capital at least on an accounting basis at a far cheaper rate than raise it via debt; it is clear that there are a number of SMEs that really need equity capital for growth rather than more debt.”

Though the process of SMEs listing is a slow one, it is important for economic growth.

“If there is some tweaking to do in terms of the tax benefit, in terms of other factor, then that will have to be done, but it is not something we can walk away from, we have to walk to and embrace SMEs.

“We have not had an SME listing as yet, even though the infrastructure for it has been in place close to a year. The brokers would go out liaise with their clients. I cannot say how long it will be before we have a listing, but I am aware discussions and negotiations are going on.”

TTSE and Jamaica Stock Exchange

Ramkhelawan said Jamaica is successful in listing SMEs because: “The Jamaica stock market is a little bit more developed than ours in terms of accessing and raising capital. They’ve had a reasonably successful SME programme. We have not had that yet. We do have the advantage, I feel, of really positioning ourselves as a regional capital market.

Comparing the Jamaica Stock Exchange with the TTSE, Ramkhelawan said it takes more fiscal policy to be put in place in T&T’s exchange system to attract SMEs to list.

“Giving up of the tax has been far more aggressive than in ours. In our situation, the tax rate will be adjusted downwards, but removed entirely. That is a policy matter, whether you want to remove taxes altogether or whether you want to balance it, to give a sufficient incentive to small players to come on board.”

“We need to have effective trade in services agreements with some of our neighbours; not just trade in goods, trade in financial services that will allow for insurance, that will allow for banking, that will allow for securities. If you look across Latin America, we do not have trade in financial services. The most recent trade agreement is in Panama, which is trade in goods. Some of the other trade agreements are somewhat broken.

“We don’t have double taxation agreements with our neighbours. It means that no investor wants to be taxed in T&T for an investment and then have to be taxed again at home. Double taxation treaties would allow for a level pegging, meaning you don’t have to pay twice to the tax man.”

Barriers to investment, such as double taxation and trade service agreements, tend to deter investors from investing in countries or territories in this region, Ramkhelawan said.

Other Initiatives

Normally the process of investing occurs when: “an investor buys a stock on the stock exchange, that stock is held for him or custodied for him in a subsidiary of the TTSE known as the T&T Central Depository (TTCD). The TTSE plans to engage in “custodying” not only in TT dollars but in US dollars.

Ramkhelawan said: “When you buy that stock, the stock is then held to your order and in your name by the TTCD, you no longer need to have a physical certificate it is held for you and the confirmation is there.”

This is known as the de-certified way of trading. There are investors who still have certificates and they can continue to trade using those certificates. The investors who still have certificates must bring it in to the stock exchange in order to be able to trade.

“We are moving from a stock exchange per se, stock being equal to shares and preference shares to a securities exchange where we are now trading bonds, mutual funds. We are not only trading in TT dollars we are moving to trade in other currencies.”

By October, the TTSE is expected to introduce investing directly into the United States and this means the investor would not have to change from $TT to $US and vice versa.

“If somebody (in T&T) wanted to buy a stock abroad suppose it is Microsoft, they will be able to go to their broker, the broker in T&T would have to laise with the corresponding broker abroad to effect the trade. The investor goes to the (local) broker and indicate he wanted to buy stocks in the US-based company, once there is agreement, the T&T broker then arranges with his correspondent broker abroad the broker buys it.”

“Up until now, the custoding for that would have to take place abroad, (but in October) that person would then be able to hold those shares in custody with the T&TCD. When the TTCD sends out a statement it would state that you (the investor) hold these TT denominated shares, then you would see another grouping (on the statement) where you would see you hold Microsoft (shares). That is the very significant change that is taking place.

Legislation

There is some tweaking of the legislation that is needed.

“I think the legislation has moved to a place where you have a balance and that is important. How the bye laws turn out to facilitate is the other area, then, enforcement. The speed at which the exchange can operate will depend on the speed at which the SEC would operate in terms of the approval of issuers and issues. It really is a collaboration and cooperation to ensure that the pipeline is not stymied by extensive delays at the level of the SEC.

“You have all these players, you have the broker, you have the SEC, the exchange and the issuer. The thing about regional capital markets is that regional capital markets you can get front mover advantage, if you could establish efficiency and effectiveness in meeting the needs of the client base, you have to be out front.

“To be outfront you must have efficiencies at the level of the SEC, the exchange, at the level of the brokers and then you can satisfy the legitimate needs of the issuers.”

The harmonisation which he speaks to is not existent but Ramkhelawan said there are some “sticking points” with regard to speed but it would have to be ironed out.


Source:
Nadaleen Singh
Trinidad Guardian
Thursday July 4, 2013

​http://www.guardian.co.tt/business-guardian/2013-07-04/ttse%E2%80%88chairman-smes-inclined-list-process-slow