Jan 2007 Financial News

Regional stock exchanges lobbying for 50% cut in cross-listing fees

Jan 31, 2007

As part of its proposal for an integrated stock market, board members across the three major regional exchanges - the Jamaica Stock Exchange (JSE), the Barbados Stock Exchange (BSE) and the Trinidad & Tobago Stock Exchange (TTSE) - are also lobbying for a 50 per cent reduction in cross-listing fees.

"Our board - of the three exchanges - will be looking at reducing the fees for the companies that are cross-listed so that the fees in the primary market will remain as is, but the other markets that they are listed in will see the companies receiving a reduction in fees of 50 per cent," Marlene Street-Forrest, JSE general manager, told the Business Observer yesterday.

The proposal to integrate the regional trading of equities was heavily promoted at the second annual JSE Investments and Capital Markets Conference three weeks ago. Through an alliance of the JSE, BSE and TTSE, called the Caribbean Exchange Network, the initiative is being touted by Street-Forrest as one which will enhance the efficiency of trading stocks regionally.

"Through this vehicle - the Caribbean Exchange Network - we will be trading securities of all markets, therefore, a personal investor in Jamaica who wants to buy a security on the Trinidad & Tobago exchange, (for example), can do so through a broker in Jamaica. It's a seamless operation," noted Street-Forrest.

"There are some benefits that we see to this regional alliance (if approved): The benefit of persons having access now to over a hundred companies, they will not have to possibly ask a broker in another country to do a transaction for them and there will be a greater mix to the investment portfolio," she added.

In 1991, Jamaica, Trinidad & Tobago and Barbados, in an effort to achieve greater mass and deeper regional integration, entered into an arrangement for cross-border trading. Today, however, while there are a little over 100 companies on the three exchanges combined, only a total of 11 companies are cross-listed and a variety of problems with cross-border transactions have prompted the new proposal for a harmonised regional exchange.

Street-Forrest pointed out that, mainly due to promotional reasons, she does not believe that having a regional exchange will deter companies from becoming cross-listed.

"The question arises that, with this arrangement, a company could say that they would be getting the benefit of a regional exchange so they might not see the need to be cross-listed," said Street-Forrest. "However, there are various advantages still, to being cross-listed, given the fact that you continue to get exposure in the markets and other promotional reasons."

Listing fees are calculated based on a percentage of the company's average market capitalisation.

Don Wehby, chief executive officer of GraceKennedy (GK) Investments, said that a firm such as his, which is listed on all the regional stock exchanges, would benefit greatly from the reduction in cross-listing fees.

"GraceKennedy is the only company listed on all the exchanges, so if we were to get a reduction in listing fees that would be very welcomed," said Wehby, who also noted that his firm spends in the region of $1 million to list on the JSE alone.
However, the senior executive of one of the Caribbean's largest conglomerates said that an ironing out of the differing regulations among the three exchanges should be a prerequisite to any financial integration.

A key issue that Wehby addressed was that of the different disclosure standards. One of these issues, he said was that, while firms on the JSE have to report quarterly, in Trinidad and Barbados it differs "significantly", due to the fact that they only have to report twice a year.

"There are some fundamental rules that differ on the various exchanges and there must be a harmonisation of these rules if we are going to seriously be considering a true regional stock exchange or even a virtual one," said Wehby. "To ensure efficiency of any market, you have to have a standardisation of timely disclosure."

Added Wehby: "One of the things that I will argue that we need to push for is that all the exchanges throughout the region must have the same reporting deadlines.the Jamaican Stock Exchange's reporting deadlines are much more stringent and the rules on the various exchanges also differ."


Source:
Julian Richardson, Business Observer staff reporter
The Jamaica Observer
Wednesday 31, January, 2007

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