JAMAICA STOCK EXCHANGE “Providing a Fair, Efficient and Transparent Stock Market”

JAMAICA STOCK EXCHANGE “Providing A Fair, Efficient and Transparent Stock Market”

Performing Stock Exchange for 2015 #1 - Bloomberg JAMAICA STOCK EXCHANGE “Providing A Fair, Efficient and Transparent Stock Market”

Performing Stock Exchange for 2015 #1 - Bloomberg

2 Business View Caribbean Jamaica Stock Exchange Limited #1 performing stock exchange in the world

Marlene Street-Forrest is the General Manager of the of the exchange from the regulation of the exchange Jamaica Stock Exchange. Recently, Business View to ensure greater corporate governance, [and to ad- Magazine talked with her about the role the Exchange dress] any concern persons may have that there could plays in the economic life of the island nation, and how be improprieties in respect to a decision taken by a its various financial services operate. The following is broker/member who is also member of the Board of an edited version of that conversation. the Exchange. So, we have regulatory functions separate from the Board of Directors. This is common in Can you tell us how the Jamaica Stock Exchange be- the more global exchanges; for example, the New York gan? Stock Exchange is a demutualized exchange.” “The Stock Exchange was started in 1968; we began trading in 1969. It was born out of our Central Bank. And the objective, both then and now, is to ensure that we have an orderly market for raising capital for the AT A GLANCE development of businesses and the country, and also to ensure that we have an efficient and orderly sec- WHO: Jamaica Stock Exchange Limited ondary market for the transfer of these securities. The idea was that we were of age – we got our indepen- WHAT: The principal stock exchange of Jamaica dence in 1962 – to have an orderly stock exchange.” WHERE: Kingston, Jamaica How is the Exchange structured? WEBSITE: www.jamstockex.com “The Jamaica Stock Exchange, the only exchange in the country, so far, is a public, Limited Liability Com- pany (LLC), owned by its shareholders; it is a demutualized exchange – the first to be demutualized in the What are the requirements for a company to be list- English-speaking Caribbean.” (Demutualization is the ed on the Jamaica Stock Exchange? process by which a customer-owned mutual organiza- “We have different markets – we have the main mar- tion or cooperative changes its legal structure to form ket, and the junior market. The requirements for a a joint stock company. Historically, stock exchanges company to be listed on the main market are different, started as mutually governed, self-regulated struc- somewhat, from listing on the junior market. However, tures where profit was not a very strong motive.) in general, the listing on a market would require that that company is a public company from the CARICOM “What we did, in 2008, is to separate the ownership region, except where, if the company wants to list on

Business View Caribbean 3 our exchange and is domiciled otherwise, the company would have had to be listed on a major exchange in its own jurisdiction.

“In terms of capital, the company must bring to the market 20 percent of the ownership of that company; for the main market it must be in the hands of 100 shareholders, and for the junior market, 20 percent of the ownership of the company must be in the hands of, at least, 25 shareholders. And the reason for this is so that there can be ‘float’ in the market - the Articles of Incorporation must state that the shares are freely transferable. The company must also be bound by the listing agreement of the Jamaica Stock Exchange in terms of pre-listing and post-listing requirements. The company must produce its quarterly financial statement, its annual financial statement, audited finan- cials, and its annual report on a timely basis. Other than that, it follows normal rules of the Exchange or

4 Business View Caribbean the company can be suspended or de-listed.

‘The company, when it comes to market to be listed, must get the approval of a Committee of the Board, called the Listing Committee. Again, the company must have a Board of Directors, an audit committee, and all the various requirements of a global, recognized stock exchange, as embedded in our rules.”

How many companies are currently listed on both exchanges? We have approximately 62 companies listed on the main exchange and the junior market; 25 companies on the junior market and the difference on the main market.

How many brokers work the Exchange? There are 12 brokers that have been approved as member/dealers of the Jamaica Stock Exchange and these brokers also have to be approved by the Finan- ICT

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Business View Caribbean 5 cial Services Commission, which is comparable to the tioned, Jamaican? U.S. Securities Exchange Commission (SEC). Also, the Yes. And you find that more and more that they are Jamaica Stock Exchange is licensed by the Financial predominantly Jamaican. We also have, for example, Services Commission and regulated by it, as well. the Trinidad Cement Company, which by virtue of its name, you realize is from Trinidad and Tobago. It is Is there a typical type or size of company that gets cross-listed on our Exchange. By cross-listing, I mean listed? In the states, there are different exchanges – that it is listed on the Trinidad and Tobago Stock Ex- one just for technological companies, for example. I change and it’s also listed on ours. imagine, since the Jamaica Exchange is much small- er by comparison, that any company that meets your If a company wanted to trade its stock, are there any criteria can join. alternatives available? We are the only exchange that trades publicly-listed Correct. So, for example, where you have the NASDAQ companies. A company that is listed on our Exchange that is heavily technological, ours is not. So, we have trades on our Exchange, so we are the only game in banking, we have insurance, we have manufacturing town. – any company, so long as it meets our requirements can be listed on the Exchange. You said that you became a demutualized exchange in 2008. Has anything else occurred recently, or Are most of the 60 plus companies that you men- planned for the near-term future, that will further im-

6 Business View Caribbean pact the way you operate – expansions, upgrades, ability and sustainability of the Exchange. So, we don’t new initiatives? only depend on revenue in relation to trading on the When we talk about the Exchange, we’re talking about market, but on other things, as well. the Exchange Group, because we have subsidiaries. The Jamaica Stock Exchange has a subsidiary called Anything else new or planned for the near-term? the Jamaica Central Securities Depository (JCSD) and You have to be relevant. So, we just launched our on- it has a subsidiary called the Trustee Services Lim- line trading platform and that is just to keep up with ited. I say that in order to answer that question. The technology and to offer to our investors another way in Stock Exchange, in and of itself, supports the market which they can connect and trade through the Stock in terms of the listing of companies, of bonds, and Exchange. That is a strategic direction so that persons different markets. We, in turn, are supported by the in the Diaspora, and persons all over the world, can JCSD, which is the settlement arm of the company. We purchase or transact easily and more conveniently. see ourselves as providing full service, so, in terms of building out our resources, we added the Trustee Ser- The traditional picture of a stock exchange floor is vices and other services, like registrar services. And a noisy, raucous place where people are shouting that is how we are developing the Exchange, or the orders and screaming over one another. But these Exchange Group, in order to provide full services in re- days, as you suggest, a lot of trading is being done spect to anything related to securities. These are on- online. Do you have that traditional trading floor any- going improvements and expansions to ensure the vi- more?

Jamaica Stock Exchange 2015 Top Performer - Bloomberg

Livingston, Alexander and Levy congratulates the Jamaica Stock Exchange on its sterling achievements in the development and growth of the capital markets.

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Business View Caribbean 7 As far back as 1998, we have had an electronic trading How many employees are doing all of this work? platform. So, the days of the ‘open outcry’ are gone for In the Exchange Group, we have somewhere in the re- us. So, you have an electronic trading platform, which gion of 80 employees. is separate and apart from allowing persons to trade online. What are some of the Exchange’s long-term plans? What significant objectives would you like to see Because when you trade online, you’re going through achieved over the next, say, five years? an established broker, right? Looking down the road, you would see us being the Yes, you still are going through an established broker. platform for the trading of government securities, be- And I’m happy that you know that, because so many cause we don’t currently trade government bonds; you times, people believe that online trading means that would see us being the one-stop-shop for all things securities, so you would be seeing options - right now we’re not trading options, so you would see an options market; you would also see us trying to facilitate the government in the area of foreign exchange trading. What we see ourselves as is a company that will provide financial services, not only for Jamaica, but for the wider region, so we’re looking internationally for persons to see opportunities and come to our market for its benefits. an investor connects directly to an exchange – which In the United States, a criticism of the SEC, the mar- they don’t. kets’ regulatory agency, is that it is sometimes seen as being prone to political pressures - that it suc- Without the ‘open outcry,’ I imagine that the Ex- cumbs to the ideology of the whatever administra- change is kind of a quiet place to work. tion is in power and, thus, is not an ‘honest broker.’ It looks quiet, but because we are doing so many If the government in Jamaica changes does that af- things - building on our current platform - the Stock fect the regulatory landscape, there? Exchange is not very ‘quiet.’ We are building out our No, we don’t have that here. We have continuity. There trustee, our registration, our repo business where we might be a change in emphasis, but definitely not one are acting as the trustee for the government’s Repur- of quality. We are governed by the Securities Act, and chase Agreement. We are also developing a market for even though we have had a change in government, we Jamaica Depository receipts, so by the end of the first are not expecting any change that would be inconsis- half of 2016, we will be launching that market. And tent with our financial services laws and regulations. I so, we continue to look at opportunities and to look at have been at the Stock Exchange for 16 years, so I’ve what may interest our investors or member/dealers. seen a few changes in government and our Securities Anything that is compatible, or could be of interest to Act has withstood all of that. our investors, we look at and see whether it is some- Now that our time is almost up, what are some of the thing that we will pursue. most important points that you would like our read- ers to take away from this conversation?

8 Business View Caribbean Our fine regulatory system. Corporate governance is complexity surrounding the technologic space. With very important to us and, as such, we properly regu- this in mind, SA endeavors to allow its clients to focus late our listed companies and our member/dealers. on their core business while it investigates, guides, And we, ourselves, are regulated. And we were cited and implements solutions that validate its slogan: “To- by Bloomberg as being the Best-Performing Stock morrow’s Technology…Today.” - www.softwarearchi- Exchange in the world for 2015. And if we were not tectsjm.com considered – from a global standard – as a stock exchange with credibility, we would not have been cited Livingston, Alexander & Levy – Livingston, Alexander by Bloomberg. Credibility – we thrive on that. Also, in & Levy has an unmatched record in delivering excel- term of our outward look, we are a small but progres- lent legal services. An unbroken partnership for over sive stock exchange that easily facilitates capital ex- a century, the firm is well known for providing timely, pansion. pragmatic, legal solutions delivered with in-depth anal- ysis of the law. LIVAL is highly regarded in the areas of PREFERRED VENDORS Corporate/Commercial, Tax, Pensions, and Litigation. Software Architects Ltd. - Established in 2007, Soft- - www.lival.co ware Architects Ltd. (SA) prides itself on being a cli- ent- centric, IT Consultation Company. SA understands Grace Kennedy Ltd. – www.gracekennedy.com that clients need more than software development; Financial Services Commission - www.fscjamaica.org they need IT partners that can remove the mystery and Proven Wealth Ltd. - www.provenwealth.com

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Business View Caribbean 9 www.jamstockex.com