International Securities Market – A Potential Boost for the IBFS Sector and the Economy

An International Securities Market (ISM) is defined as a market for the listing and trading of securities of issuers incorporated in a specific territory that would otherwise be listed and traded on other exchanges around the world. At the Barbados Stock Exchange Inc. (BSE) it is our intention to create such a market, emphasizing our […]

By Barry Blenman

December 5, 2011

International Securities Market International Securities Market

An International Securities Market (ISM) is defined as a market for the listing and trading of securities of issuers incorporated in a specific territory that would otherwise be listed and traded on other exchanges around the world. At the Barbados Stock Exchange Inc. (BSE) it is our intention to create such a market, emphasizing our commitment and support to the International Business and Financial Services Sector (IBFS) and the Government of Barbados as it strives towards making Barbados the premier capital market hub for the region and as we continue to fulfil our mission “to foster an environment of confidence and trust in the activities of the capital markets, so that all Barbadians would participate in the trading of financial instruments”.

At the BSE, we believe the establishment of the International Securities Market (ISM) would be beneficial not only to the members of the international business community but also to the economy of Barbados. There are certain basic advantages associated with having an efficiently functioning stock exchange, many of which would be further enhanced by the establishment of the International Securities Market (ISM). The Exchange currently provides private corporations with a source of raising capital through initial public offerings when going public or via rights issues, once publicly listed, usually to fund various growth initiatives outlined by the company and approved by its shareholders or to fund acquisitions. The Exchange also provides the general public with the opportunity to invest in securities issued by both local and regional companies listed on its board. The opportunity for wealth creation also exists through the receipt of dividend payments made by listed companies to their shareholders as well as capital gains through the sale of shares at a price higher than the purchase price.

The addition of the International Securities Market (ISM) to our market gives existing International Business Companies (IBCs) the same opportunities afforded to those companies currently listed on the Regular and Junior Markets of the BSE, to raise capital to fund operations, expansion and/or acquisitions as well as elevate the organization’s public profile locally, regionally and internationally by generating greater public awareness on the nature of the business and the services provided. This raised profile with customers, suppliers, current investors, potential investors and the media may prove beneficial especially in developing better perception of the business and financial strength of each organization listed on the ISM as well as the entire International Business and Financial Services (IBFS) sector. While new IBCs stand to gain from an already well-established legislative framework and a cadre of highly educated professionals, the advent of the ISM, we believe, will provide a catalyst for improving legislation and ensuring smooth and seamless company registration/incorporation in Barbados and listing on the ISM. The aim here is to create an experience for the IBC that is second to none that can be used as a benchmark for other jurisdictions to follow. We believe that the combined efforts of the BSE and ISM, our Regulator – the Financial Services Commission (FSC), the Corporate Affairs and Intellectual Property Office (CAIPO) and the Ministry of International Business and International Transport can provide the synergies necessary to achieve this goal further fostering an environment that is more conducive to IBCs desirous of doing business in Barbados.

It is our belief that the establishment of the International Securities Market (ISM) would also attract more non-traditional IBCs to Barbados, resulting in more employment opportunities for Barbadians as well as partnerships between these non-traditional IBCs and local companies that they may be aligned with in terms of the nature of their business. There is also great potential for the transfer of much needed skills and technology. Many of these non-traditional early stage, high risk, high potential, start-up companies such as biotechnology, IT and software companies utilize private equity capital from venture capitalist and angel investor firms. The venture capitalists and angel investors generally invest in these types of organizations with the expectation of receiving a return through a realization event such as an IPO. Establishing a market where these organizations can list would therefore provide early stage investors like the venture capitalist and angel investor firms with an exit strategy and also afford other investors with the opportunity of investing in these companies. Exposing the venture capitalist and angel investor to Barbados may also reap great rewards to many local enterprises, especially those that are entrepreneurial in nature. Many entrepreneurs would rather sell a stake in their company than utilize what can at times be described as burdensome debt financing; often times the entrepreneur cannot attain the level of debt financing required to facilitate growth initiatives. Venture capitalists and angel investors may be able to make up the shortfall and still have an avenue to recoup their investment through IPO listings on the BSE. Joint ventures of this nature would support the Barbados Entrepreneurship Foundation’s vision to make Barbados “The #1 entrepreneurial hub in the world by 2020” and assist Government’s drive to encourage more innovation and entrepreneurship in Barbados.

The direct benefits to the Government of Barbados would include greater recognition of Barbados as a premier location for conducting business, the expansion of the IBFS, potential for the creation of new jobs and opportunities for local professionals who have specialized skills in the areas of international business, corporate law, finance, etc., and the associated increase in revenue received in the form of the corporation taxes paid by the IBCs. The public listing of IBCs, though not intended to be mandatory, should be encouraged by the Government of Barbados as the obligations of companies listed on the International Securities Market (ISM) will ensure that information relating to the activities of said companies is reported not just to its shareholders but the general investing public as well. The listing obligations may include, but are not limited to, the convening of an annual meeting of its shareholders, the preparation, filing and reporting or dissemination of quarterly financials and annual reports to the Exchange and to the shareholders of the company as well as giving notice to the Exchange of any material change in the business or affairs of the company. Also note that any filings submitted may, at the discretion of the Exchange, be made public. Disclosures of this nature will help to instill confidence in the international companies listed, ensure that good corporate governance practices are being utilized and maintained and, most importantly, provide a library of data and information that is easily accessible to all. At the same time, having a formal market for the trading of international securities will also address the important issue of transparency in international investments. The trade data stored in electronic trading databases can be used to compile market reports for easy dissemination to key stakeholders to ensure that all activity conducted on the board of the ISM is in line with international standards.

While the BSE would benefit from the increase in trading activity, the ultimate beneficiaries are the investors. We understand that our local market is small and with the current recessionary effects still affecting our economy, there are fewer opportunities for persons interested in investing. We will never turn our backs on the local capital market but it is imperative that we maintain our commitment to the investor by offering more creative investment products and services geared towards improving liquidity and increasing trading activity. The International Securities Market (ISM) is but one such product that will not only provide a larger pool of securities to both institutional and individual investors, internationally, allowing for greater diversification of their investment portfolios and offering them better investment and wealth creation opportunities, but also serves as a marketing tool to attract more IBCs to the island. Its addition at the BSE will add great value to its current operations and has great potential for stimulating more activity not just in the local capital market but in the wider economy as well. The BSE stands ready and intends to ensure that our vision “To be a great and lasting Caribbean Institution by facilitating wealth creation through trading on an efficient and cost-effective Exchange” is accomplished.

Barry Blenman

Operations Supervisor, Business Development at Barbados Stock Exchange Inc.