Stock Exchanges Of The Caribbean: Evolving To Serve The Next Generation

At present, there are five exchanges operating in the Caribbean region - the Barbados Stock Exchange Inc. (BSE), Eastern Caribbean Stock Exchange (ECSE), Guyana Association of Securities Companies and Intermediaries (GASCI), otherwise known as the Guyana Stock Exchange, Jamaica Stock Exchange (JSE), and the Trinidad and Tobago Stock Exchange (TTSE). Each exchange operates independently, with its own rules, policies and procedures and regulated by a regulatory body in the jurisdiction. The exchanges provide listing and trading services for issuers of securities – equity and fixed income – domiciled in their respective jurisdictions and, in turn, provide investing and wealth creation opportunities for citizens.

As time progressed, regional exchanges introduced the cross listing of securities which allowed companies to expand their footprint and gain greater exposure in new markets while acquiring additional investors from new jurisdictions. This activity, by extension, increased the equity and fixed income offerings of the exchanges, which gave investors more opportunities to diversify their investment portfolios; albeit in the same types of vanilla securities. As regional exchanges matured, their drive to create more opportunities led to the expansion and extension of their capital mobilisation and wealth creation facilities to extra-regional corporations and investors with the introduction of markets specifically designed to cater to these foreign interests. Both the JSE and TTSE have markets that make provision for the listing and trading of US$ equity securities. The BSE also has its International Securities Market (ISM) which is a dedicated market for the listing and trading of securities, in hard currencies, by issuers who may or may not be incorporated in Barbados and that would otherwise be listed and traded on other exchanges around the world.

To date, each exchange has been fulfilling its traditional role as a stock exchange with varying levels of success; each operating at different stages in their respective life cycles.  Nonetheless, they all continue to mature and evolve into the wealth creation engines they were established to become. What is common with the maturation of all Caribbean exchanges is their inherent desire to future proof the capital markets to ensure their continued support and involvement in promoting and providing sustainable investment opportunities to the next generation of investors in their respective jurisdictions.

Collectively, Millennial, Gen Z, and Gen Alpha individuals were birthed, and have aged, with technology at their fingertips; figuratively and literally. Each successive generation has benefitted significantly from technology – both hardware and software – and the resulting new developments and improvements garnered. Technologies have increased in their complexity and design; devices have become smaller and more portable while simplifying the ways in which we exist. Modern technology has allowed humans to instantly access data and information and improved their ability to process multiple sources of data and information. Fundamentally, access has permitted us to make quicker and better informed decisions. As technologies improved, so too has the quality of life of citizens across the globe. The application of new technologies to grant instant access – whether it be to information for decision making purposes or to devices and systems that make our daily lives easier – has become a critical talking point at all levels of society across jurisdictions.

As it relates to the evolution of regional markets and their ability to service the needs of future generations, ensuring that these investors have access – in totality – will be a key determinant to the future growth, development, and success, of the regional stock exchanges. This will hold true whether the exchanges continue to operate as individual entities or collectively as a single cohesive wealth creation engine. Exchanges must therefore leverage the current technologies and position themselves to both meet, and exceed, the expectations of this ‘new breed’ of investors. Efforts must also be made to continuously improve existing products and service offerings on both the supply and demand sides while ensuring they maintain the highest levels of quality service delivery.

At the highest level, consideration should be given to focusing energies on working collaboratively with Regulators to better the ease of access to the capital markets for prospective issuers and intermediaries. An onboarding platform, specifically designed to ensure that prospective issuers – especially those in the SME sector – and intermediaries meet the legislative requirements of Regulators, and by extension the rules of the exchanges, should be implemented to replace the current paper based system. Additionally, this platform could be used to streamline the reporting obligations of existing issuers and other market participants by permitting the electronic submission of those mandatory filings necessary to ensure that they are in compliance with the legislated ongoing requirements of the Regulator. Should the exchanges move towards a single regional exchange, under the supervision of a single Regulator, considerations should be given to the utilisation of such a technology, firstly to harmonise the regulatory requirements across jurisdictions, simplify the application and registration processes and facilitate smoother and more efficient IPO; and secondary listing processes for both large and small listings.

On the demand side, technology must play a major role in satisfying the next generation of investors’ appetite for access to data and information, investment products and services. In the early days of exchanges, the open outcry method of trading was acceptable. The introduction of personal computing resulted in brokers moving away from taking client orders by telephone and converging on the stock exchange on each trading day to strike deals and effect trades to remotely keying client orders using web-based trading platforms; the only physical interaction required would be client onboarding for their internal KYC requirements and obligations under the rules of their respective stock exchange. The switch to electronic trading was accompanied by the establishment of electronic clearing and settlement facilities which shortened the settlement cycle of trades.

Investors today are far more informed and want to monitor their portfolios more closely; they desire instant access and want to be more actively involved in managing their investments. Exchanges (and Intermediaries) therefore must find ways to grant this instantaneous access to the investor. The advent of online trading facilities, mobile devices and their associated application technologies, have made this possible and the exchanges in the region are making strides on this front. Exchanges across the region currently provide online trading facilities with some moving towards the provision of mobile trading applications. The initiatives have been received with moderate success and the uptake by next gen investors has been quite favourable.

While regional exchanges have made great progress in their data and information dissemination capabilities, more exposure through channels more familiar to next gen investors might be necessary. Access to basic market data will not be enough; what is truly required to make Caribbean capital markets more vibrant is the provision of more analytical coverage of listed companies. The challenge for regional exchanges, however, is that as self-regulatory organisations (SROs), they are mandated by law to publish data/information that is impartial in nature only. What this does, however, is create a business opportunity for licensed investment advisors, who are registered with the regulators in their respective jurisdictions, to produce easily digestible and insightful company reviews, reports and blog posts using data gathered from the exchanges. The regional exchanges have utilised modern technologies and improved their respective websites, introduced email subscription services and provided API services for reporting agencies who wish to provide real time trade data to their subscribers. The data collected and collated would be disseminated to investors to make wiser investment decisions.

Further, to change the general savings culture within the Caribbean, the general opacity of our capital markets must be illuminated. Thoughts therefore must be given to the establishment of a regional media outlet focused solely on continuous, business & company specific information. CNBC & Bloomberg (for example) do a stellar job of this for the US markets. In both instances, listed companies must become accustomed to sharing regular business updates with the public, so that there is wider appreciation for their operational strategies in lieu of capitalisation demands. This does not have to (solely) take the form of traditional media (television and/or print media) – this platform could be established in a web-based environment where viewers are already situated for their socio/self-actualisation needs.

Despite their relative successes, regional exchanges continue to seek and deliver new opportunities for both issuers and investors. Issuers across the globe are seeking new liquid markets to raise capital while investors are searching for additional investment opportunities to diversify their investments and create portfolios more in line with their respective risk tolerances. While the addition of more traditional listings or the introduction of “new” (to these jurisdictions) security types such as futures, derivatives, or digital assets would satisfy all and sundry, regional exchanges must find creative ways to leverage technology at all levels, to harmonise their operations, create greater exposure for their respective markets or the regional capital market as a whole, all while placing key data and information directly in the hands of interested parties to ensure the retention and attraction of both existing and next generation investors and issuers.