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Finance Minister Audley Shaw yesterday asked the Jamaica Stock Exchange (JSE) to prepare within a week, a formal proposal for the trading of government bonds on the secondary market.
The urgency of Shaw's request was underlined by a finance ministry source who told the Business Observer that if the proposal was approved it would be fast-tracked.
Shaw made the request after JSE executives made presentations to him, the financial secretary, Bank of Jamaica governor, the deputy director of the Financial Services Commission and other members of their teams encouraging the action.
"This potential feature of tradability is seen as a potential enhancement now made possible as a by-product of the recent Jamaica Debt Exchange (JDX) and its accompanying legislation, which significantly reduced the number of securities and made electronic buying and selling, rather than manual paper-based transfers, possible," the JSE said.
The executives argued that by making Government debt tradable on the JSE, investors stand to benefit from more market information and potentially better prices on what would be a more efficient and transparent secondary market.
Investors, they said, would be able to track the performance of their investments and expect greater public interest and participation in buying and selling Government bonds.
"All these factors should serve to make Government of Jamaica securities more attractive to local and international investors and will likely translate into less demand-side pressure on the Government to increase the interest rates of future issues," the JSE said. "The Government would also expect to see a better regulated secondary market that will serve as an indicator of future demand for its debt securities."
According to Marlene Street Forrest, general manager of the JSE, the Stock Exchange provides the ideal vehicle for soonest implementation, pointing to the outstanding capabilities of the JSE's existing software, communications network and systems that would allow most primary dealers immediate access without additional investment of any kind. She also pointed out that this is standard procedure globally.
"Jamaica stands out as one of the few countries in the world that has not yet made full use of its existing systems to harness the true potential of the Market," Street Forrest noted. "Almost every other country in the world allows their sovereign debt to be traded on the stock exchanges in that country."
Added Street Forrest: "We know of no central bank or other government entity in the world that takes on trading responsibilities. They leave it to the private sector to take the ball and run with it. Government debt is traded on our colleague exchanges in the USA, Canada, England, throughout Asia, Europe and South America and even in our neighbouring Caribbean islands, Barbados and Trinidad, using the same or similar software to what we currently have in place. Electronic trading was difficult before, but now, with the JDX, we have a whole new ball-game."
The operational capabilities accompanying the measure were addressed by Robin Levy, general manager of the Jamaica Central Securities Depository (JCSD).
"We have a sound, tried and tested operational platform for safe sub-custody and efficient settlement of securities and funds," he said. "Persons who have invested in the equities market already know about the extra features we have available, like Internet monitoring or their security positions, and these persons will have a good idea of the positives the JSE and JCSD would bring to this area.
"Since the JSE, JCSD and primary dealer would have little to do by way of additional investment, our costs will be relatively very low, probably even lower than those for the equities market, and this should encourage investors even more. We know this is a win-win solution for everyone and look forward to moving towards implementation," he said.
Levy added that the JSE was committed to working assiduously with the finance ministry, the FSC and the BOJ to make this happen, "so that Jamaica can start reaping the benefits".
Andrea Kinach, attorney-at-law with Patterson Mair Hamilton and specialist on international stock market regulation, agreed.
"The Jamaica Stock Exchange is being very proactive and the minister is to be commended for taking this on," she said. "The benefits are obvious, and this is truly one of those right-place and right-time situations. What the JSE is proposing is right in line with recognised practices in all the world's leading markets, where sovereign debt securities trade well in world centres. The Jamaica Stock Exchange has the capability, and the country's legal requirements are now in place, so this is something I think the Jamaican people would want to see in a short space of time."
http://www.jamaicaobserver.com/busin...on-JSE_7581588
The urgency of Shaw's request was underlined by a finance ministry source who told the Business Observer that if the proposal was approved it would be fast-tracked.
Shaw made the request after JSE executives made presentations to him, the financial secretary, Bank of Jamaica governor, the deputy director of the Financial Services Commission and other members of their teams encouraging the action.
"This potential feature of tradability is seen as a potential enhancement now made possible as a by-product of the recent Jamaica Debt Exchange (JDX) and its accompanying legislation, which significantly reduced the number of securities and made electronic buying and selling, rather than manual paper-based transfers, possible," the JSE said.
The executives argued that by making Government debt tradable on the JSE, investors stand to benefit from more market information and potentially better prices on what would be a more efficient and transparent secondary market.
Investors, they said, would be able to track the performance of their investments and expect greater public interest and participation in buying and selling Government bonds.
"All these factors should serve to make Government of Jamaica securities more attractive to local and international investors and will likely translate into less demand-side pressure on the Government to increase the interest rates of future issues," the JSE said. "The Government would also expect to see a better regulated secondary market that will serve as an indicator of future demand for its debt securities."
According to Marlene Street Forrest, general manager of the JSE, the Stock Exchange provides the ideal vehicle for soonest implementation, pointing to the outstanding capabilities of the JSE's existing software, communications network and systems that would allow most primary dealers immediate access without additional investment of any kind. She also pointed out that this is standard procedure globally.
"Jamaica stands out as one of the few countries in the world that has not yet made full use of its existing systems to harness the true potential of the Market," Street Forrest noted. "Almost every other country in the world allows their sovereign debt to be traded on the stock exchanges in that country."
Added Street Forrest: "We know of no central bank or other government entity in the world that takes on trading responsibilities. They leave it to the private sector to take the ball and run with it. Government debt is traded on our colleague exchanges in the USA, Canada, England, throughout Asia, Europe and South America and even in our neighbouring Caribbean islands, Barbados and Trinidad, using the same or similar software to what we currently have in place. Electronic trading was difficult before, but now, with the JDX, we have a whole new ball-game."
The operational capabilities accompanying the measure were addressed by Robin Levy, general manager of the Jamaica Central Securities Depository (JCSD).
"We have a sound, tried and tested operational platform for safe sub-custody and efficient settlement of securities and funds," he said. "Persons who have invested in the equities market already know about the extra features we have available, like Internet monitoring or their security positions, and these persons will have a good idea of the positives the JSE and JCSD would bring to this area.
"Since the JSE, JCSD and primary dealer would have little to do by way of additional investment, our costs will be relatively very low, probably even lower than those for the equities market, and this should encourage investors even more. We know this is a win-win solution for everyone and look forward to moving towards implementation," he said.
Levy added that the JSE was committed to working assiduously with the finance ministry, the FSC and the BOJ to make this happen, "so that Jamaica can start reaping the benefits".
Andrea Kinach, attorney-at-law with Patterson Mair Hamilton and specialist on international stock market regulation, agreed.
"The Jamaica Stock Exchange is being very proactive and the minister is to be commended for taking this on," she said. "The benefits are obvious, and this is truly one of those right-place and right-time situations. What the JSE is proposing is right in line with recognised practices in all the world's leading markets, where sovereign debt securities trade well in world centres. The Jamaica Stock Exchange has the capability, and the country's legal requirements are now in place, so this is something I think the Jamaican people would want to see in a short space of time."
http://www.jamaicaobserver.com/busin...on-JSE_7581588
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