The BSE Group: Beyond The Pandemic

Amidst the rise and fall of the original virus and its subsequent variants, governments across the globe have been able to manage the respective impacts through several measures – testing and vaccination requirements, mask-wearing mandates, travel restrictions, social distancing, and hand-sanitising protocols. The “trickle-down effect” of these measures, though at times met with resistance, slowly has led to the stabilisation of economic activity, primarily in the larger economies.

The story for emerging economies, however, has not quite been the same. For emerging economies like Barbados, much of our overall economic activity is driven by the performance of sectors reliant on activity from external markets. Barbados’ economic outlook for 2022, as noted by the Central Bank of Barbados (CBB) in its Review of Barbados’ Economic Performance January to December 2021[i], “will be heavily influenced by its continued vulnerability to external shocks”. As a tourism-dependent economy, the island’s economic recovery process will rely primarily on the ability of this sector’s source markets to effectively manage pandemic impacts and, where possible, limit the reimposition of travel restrictions in their respective jurisdictions. Another major concern is the cost of international goods as Barbados has a higher level of imports versus its exports. Consequently, as we are a price taker economy, any increases in fuel or general freighting costs at this macroeconomic level will have a negative impact on the final cost of goods sold to consumers on island, thus dampening microeconomic activity and ultimately slowing the economic recovery process.

Despite the challenges, it is imperative that countries, the organisations contained within and citizens all work towards a return to normalcy; irrespective of what form said normalcy takes. The Government of Barbados opted for a staged “return” characterised by a gradual relaxation of mandates and protocols pertaining to travel entry requirements, quarantine procedures for citizens and travellers, curfew periods, mass gathering restrictions, and social distancing requirements. As the mandates and protocols eased, many organisations – both public and private sector – started to reverse their work from home procedures and the levels of economic activity have been showing steady improvements, albeit nowhere near pre-pandemic levels.

At the Barbados Stock Exchange (BSE), trading activity has contracted significantly over the past two years. Overall trading volumes and values fell sharply in 2020, experienced modest improvements in 2021 but did not live up to pre-pandemic activity. The number of trades conducted decreased, and the absence of share price appreciation led to year-on-year declines in our market measures. Against this backdrop, the Board of Directors of the BSE and its subsidiaries, commonly referred to as the BSE Group, charged itself and the Management team with the task of both developing new revenue streams for the Group while simultaneously revitalising the capital market. A Viability Committee of the Board of Directors (BoDs) was established to assess the current state of the BSE and to identify potential initiatives geared towards bringing continued growth to the Group. The committee would also oversee the execution of those initiatives approved by the wider board for implementation.

To address the former, the BSE embarked on a new business line and entered the realm of custodian and trust services through a new subsidiary – BCSDI Custodian Trust Services Inc. or BCTSI. The BCTSI was incorporated in Barbados on 28 January 2021 and is the wholly owned subsidiary of the Barbados Central Securities Depository Inc. (BCSDI) which, in turn, is the wholly owned subsidiary of the BSE. The BCTSI was established to consistently deliver cost-effective and dependable custodian and trustee services to members of the financial services industry by leveraging the existing knowledge base and extensive experience of the BCSDI as both a registrar and transfer agent and a provider of depository services. The objective for the Management and Staff of the BCTSI is the delivery of a product that is exemplary; one that strives to meet and exceed the expectations of both existing and prospective clients by being the best in the business. As at 31 December 2021, the BCTSI had US$43 million of assets under management (AUM).

The revitalisation of the capital market in Barbados is a very broad and challenging, but necessary initiative for the BSE to undertake. The major areas identified for assessment and to be addressed were the ease of access to trading, improving trading volumes, and attracting new listings. Seemingly separate and distinct, the intertwined nature of each means that improvements made in any one area will have a positive impact on the others. The goal, however, is the resolution of all areas to achieve further development of the capital market on island.

To address the ease of access, while mitigating the potential for any future events that may inhibit trading, the BSE has commissioned the development of a mobile trading application. It will be available for both Android and iOS devices and is scheduled for deployment during the third quarter of 2022. The implementation of this application is by no means intended to marginalise existing investors desirous of conducting their investing via traditional means, but rather a move to capture both new and existing investors who are more comfortable doing business on their respective smart devices. While investors will still be required to complete Know Your Customer (KYC) documents with brokerage houses, the intended end is to capture as many persons as possible, especially those young and young at heart members of the investing public, on this platform.

While improving access using the mobile trading platform widens our investor base and makes it easier for them to conduct trading, it also puts more pertinent information at the fingertips of the investing public. Better informed investors make better informed investment decisions. Therefore, easing investor access to trading through the mobile app should translate to the onboarding of more investors. The app, with its enhanced information disseminating capabilities, should yield better informed investors who in turn conduct more trades, thus improving trading volumes. Improved trading activity, with modest spreads between the bid and ask price, as well as enhanced price discovery, are indicative of market liquidity. Liquid markets are very attractive to companies searching for an Exchange on which to list their securities and raise capital.

While operating a liquid market can be attractive to prospective new listings, additional resources should be allocated specifically for capital market development. For the last nine years the BSE has been committed to promoting good corporate governance primarily to our publicly listed companies. Our efforts bore great fruit after the introduction of “Corporate Governance Recommendations for the Listed Companies on the Barbados Stock Exchange Inc.” in late 2012. We have since held nine annual conferences promoting the same and are poised to host our tenth during the fourth quarter of 2022. Additionally, we have also decided to embark on an initiative geared towards the promotion of our Innovation and Growth Market (IGM) as a primary source of capital formation for small and medium-sized enterprises (SMEs).

In late 2019, a concept paper entitled “Promoting Access to Equity Financing to Small Medium-Size Enterprises (SMEs) through the Innovation and Growth Market (IGM) of the Barbados Stock Exchange Inc. (BSE)” was drafted jointly by the BSE and the Small Business Association (SBA) of Barbados. It outlined the establishment of an incubator programme geared towards the sensitisation of members of the SME community to the opportunities afforded to them by obtaining a listing on the BSE’s IGM. After several consultative meetings the concept paper was tabled before the Ministry of Energy, Small Business and Entrepreneurship and received favourable reviews. It was further decided that an initiative of this magnitude could have greater macroeconomic impacts for the island and other jurisdictions across the region and would be better supported with the assistance of the Caribbean Development Bank (CDB). The concept paper was delivered to the CDB and after another round of meetings, was approved for grant funding and the project was commissioned.

The project’s primary objective is, “to provide by December 2023, training, and capacity-building support to 50 firms, with the expectation that at least 20 of these firms will qualify for listing on the IGM.” To achieve this broad objective the project has been broken down into three main phases set to benefit the participating firms. These include a Sensitisation and Education phase, a Diagnostic and Capacity Building phase and finally, a Raising Capital and Listing phase. The expected benefits to be derived from this project include improving private sector development especially; enhancing the corporate governance practices within the SME sector; strengthening of the local capital markets; and generally further the promotion of investment, entrepreneurship, employment, and economic development in Barbados.

2020 and 2021 could be categorised as two of the most challenging years for the BSE Group in its 36-year history. Rather than focusing on the challenges that arose, however, the BSE Group applied the requisite contingencies and retooled where necessary, allowing it to mitigate said challenges. As we enter what is believed to be the endemic stage, we believe that we have effectively managed the adversities of the last two years and are much better prepared for the future – our only goal is success. To quote the notable motivational speaker Zig Ziglar, “Sometimes adversity is what you need to face in order to become successful.”

Footnotes:

[i] http://www.centralbank.org.bb/news/article/10669/central-bank-of-barbados-review-of-the-barbados-economy-in-2021

Barry Blenman, MSc
Barry Blenman joined the Barbados Stock Exchange Inc. on February 2, 2009 in the post of Registry Services Assistant. At the time, his primary role was the management of Sagicor Financial Corporation Limited’s share register and the preparation of the BSE’s daily trading reports. On September 2, 2010, he was promoted to his current post of Operations Supervisor – Business Development reporting directly to the Managing Director. Mr. Blenman acts as liaison for external partners and internal groups with the key responsibility of identifying, negotiating and managing relationships with partners whose objectives and product/service offerings complement both the short and long-term vision of the Barbados Stock Exchange Inc. He still retains his reporting duties – researching, preparing and disseminating all market related information on behalf of the BSE, the coordination of all outreach programmes including conferences and seminars and all communications with various media outlets both local and international. Mr. Blenman has worked in the international business and financial services sector, the local manufacturing sector and the Civil Service. He holds a Master of Science Degree in Project Management, a Bachelor of Sciences Degree in Management (Upper Second-Class Honours) from the University of West Indies – Cave Hill as well as Associate Degrees in both Mechanical and Electrical Engineering.