INTRODUCTION TO THE ECSE AND DEMONSTRATION OF THE LIVE TRADING ENVIRONMENT. A Presentation Prepared for the ECSE Market Launch

Transcription

1 INTRODUCTION TO THE ECSE AND DEMONSTRATION OF THE LIVE TRADING ENVIRONMENT A Presentation Prepared for the ECSE Market Launch Baljit Vohra General Manager THE EASTERN CARIBBEAN SECURITIES EXCHANGE P.O. Box Number 94 Bird Rock, Basseterre St. Kitts Telephone #: Fax #: Toll Free #: address: info@ecseonline.com October 19, 2001

2 INTRODUCTION TO THE ECSE AND DEMONSTRATION OF LIVE TRADING ENVIRONMENT Dear Honorable Governor General of St. Kitts and Nevis, Mr. Cuthbert Sebastian, Honorable Prime Minister of St. Kitts and Nevis, Dr. Denzil Douglas, Honorable Minister of Finance, Dominica and Chairman ECCB Monetary Council, Mr. Ambrose George, Sr. Dwight Venner, Governor ECCB and Chairman, ECSE, Mr. Errol Allen, Dy. Governor, ECCB and Vice Chairman, ECSRC, ECSRC Commissioners, ECSE Board members, members of the press corps, and the distinguished audience: With the ringing of the opening bell today ECSE has now joined the league of over 100 exchanges in the world that are endeavoring to create a world of new opportunity for their local economies and businesses. We may be one of the over 100 but we are unique- we are the first regional securities market in the Western Hemisphere. ECSE represents a new opportunity for our region. A new opportunity for financing expansion of growth companies. A new opportunity for investors as they seek investment choices to diversify their portfolio. And it also heralds the dawn of a vibrant entrepreneurial culture in the OECS region. The ECSE and its subsidiaries the ECCSD and ECCSR are fully operational and have been at work from 9:00 am today to help our investors, intermediaries and issuers trade, settle and discover an effective price for securities that are now traded on our market. As a SRO, we have a well-defined approved code of conduct in place for the operation of our members who serve as intermediaries within the market. Further, as a regulated entity, we are endeavoring to fully follow the Securities Act and the regulations now in place under the stewardship of the ECSRC. WHO ARE THE PEOPLE THAT MAKE OUR MARKET - ISSUERS, INVESTORS, INTERMEDIARIES AND THE MEDIA Issuers The Bank of Nevis (Trading Symbol- BON) and the East Caribbean Financial Holding Company (Trading Symbol- ECFH) of St. Lucia have joined the annals of history by being the first two companies to list on the ECSE today. At this time, I would like to acknowledge the presence of the management of these 2 companies who worked tirelessly in the past several months with us to be where they are today. I would like for all of us to give an ovation as they stand up before the audience: a) Mr. Rawlinson Isaac, Managing Director, Bank of Nevis, and b) Mr. Marius St. Rose, Group Managing Director, ECFH, St. Lucia, the holding company with BOSL as one of its subsidiaries. Both these companies have research reports that are being distributed to the public at large and are also available outside this auditorium for all those wishing to get a copy. Both these companies want to be the blue chips of ECSE- so they tell me. I am sure they will if they continue to show the level of fortitude and vision that they have shown by being among the first with us today.

3 These 2 companies will soon have company as we work with the following issuers to have them listed with us shortly: (1) National Commercial Bank of Grenada (2) St. Kitts Nevis Anguilla Trading Company (3) S L Horsford & Co Ltd (4) Antigua Commercial Bank (5) St. Vincent Breweries (6) Grenada Electricity Company (GRENLEC) (7) St.Lucia Electricity Company (LUCELEC) (8) St Kitts-Nevis-Anguilla National Bank Ltd ECCB and ECSE staff is also working jointly on the establishment of an operational framework for the Regional Government Securities Market to enable commencement of its operations using ECSE facilities by February The ECSE will not only serve as the secondary market for trading of government securities but also provide the systems infrastructure to support primary issuance of such securities and others issued by the corporates. Intermediaries Based on a thorough review and on-site due diligence conducted by ECSE staff, we approved the participation of 4 intermediaries that will make history on our market today. They are: Antigua Barbuda Investment Bank (ABIB) Ltd- represented here by Mr. Richardson, General Manager Bank of Nevis Ltd, represented here by Mr. Isaac. Managing Director Bank of St. Lucia, represented by Mr. Marius St. Rose, GMD St. Vincent National Commercial Bank (SVG) Ltd- Mr. Mark Smith They have been open for business since very early this morning and they want to use this opportunity to market themselves by asking you to please pick up a customer account opening form before you leave today. Completed application forms can be sent to these institutions directly or given to the ECSE for forwarding to these institutions. Thank you for your creativity in marketing your services fellow member institutions- you sure do now that this is a market savvy audience that will read the 2 research reports and be ready to establish a relationship with you-maybe sooner than you think. ECSE is presently working with the following intermediaries to prepare them for membership of the ECSE: St Kitts-Nevis Anguilla National Bank Ltd Development Bank of St Kitts-Nevis Antigua Commercial Bank Ltd National Commercial Bank of Dominica St Lucia Cooperative Bank Ltd CIBC St. Lucia/Barbados

4 INVESTORS MARKETING, EDUCATION AND AWARENESS PROGRAM ECSE has a number of communication tools that have been distributed throughout the territoriesthese comprise brochures, an infomercial you saw this morning and radio spots, etc. A lot of these tools are available for you to pick-up from the outside. And please do not forget our website that provides infmn. On our rules, our intermediaries, issuers listed ands frequently asked questions. A follow-on focused Investor Marketing, Education and Awareness (MEA) Program is now underway to apprise the public of the opening of the market. This involves a series of targeted infomercials on TV and radio and a newspaper advertisement in prominent papers within the region. These are in addition to the other communication tools developed prior to this follow-on program. This program will run for 5 weeks to provide the high level of visibility for the market during the first month of its establishment. Further, we are pleased to have with us today a group of over 30 prominent journalists (TV, radio and newspapers) from all over the OECS region that were invited to participate in the opening of the ECSM market. During the course of their visit with us, the journalists also attending an ECSE sponsored workshop on Reporting on the ECSE, which is the 4 th in our series aimed at enhancing financial literacy in the region. The press has been and will serve as our partner in the realization of our broader goal to create awareness and understanding of how the ECSE works. HOW DOES OUR MARKET WORK Our market opens every day at 9:00 am and closes at 2:00 pm. It is a screen-based market with an electronic floor that can be accessed by intermediaries from any of the 8 locations. In between this period, brokers enter orders into the system that they collect from their customers who walk into their offices during the day or earlier. Before placing the order, the broker-dealer establishes a relationship with the customer and understands his/her investment objectives. Having done so, the broker-dealer then advises the customer on avenues for investing in securities. The broker can also access our online information system (ECSIN) and download recent financial reports, research reports and other information that he can share with the investor before the investor decided to execute an order. Having decided on a company that the customer may wants to buy/sell, the broker-dealer advises him/her on the most recent price by viewing the trading system that has the prices for the previous day and the quotes on display for the day. Having settled on the order and price, the broker then accesses the system to post the customer's bid. Now, let us turn on the system and see what has been happening since our market opened today. What we are about to see now are a set of screens that broker-dealers now have open in their offices from their individual jurisdictions to execute their trades.

5 SITREL Trading Environment Brokers dealers now logged into the Trading Environment (using their unique passwords) are right now accessing these two screens to see market activity and update their quotes: the Market Summary Screen and the Session Detail Screen. The Market Summary Screen This screen presents the Broker Dealer with the best buy and best sell order for each security for which there are buy and sell orders in the Market. To see all buy and sell orders for a particular security, the broker needs to launch the Session Detail Screen by right clicking on the security s trading symbol. We have already done that for you by showing you the 2 screens below. Now let us look at the Session Detail Screens for one of the securities being traded today: The Session Detail Screen presents the Broker Dealer with ALL the buy and sell orders for a particular security, with the best buy and best sell offer at the top of the list. As Buy Orders (Bid Offers) are gathered throughout the day, the ECSE trading system ranks these orders from the highest buy price to the lowest buy price. If two investors submit the same buy order price, the system will rank the order received first as higher in priority to be matched. The best buy order will be the one in which the investor is willing to buy their shares at the highest price. Similarly, as Sell Orders (Ask Offers) are gathered throughout the day, the ECSE trading system ranks these orders from the lowest sell price to the highest sell price. If two investors submit the same sell order price, the system will rank the order received first as higher in priority to be matched. The best sell order will be the one in which the investor is willing to sell their shares at the lowest price. Brokers can see the potential Execution Price that a security would trade at if the Call Auction were run at that moment, by clicking on an order. This way they could continue to update their quotes up until a few minutes before the trading days closes at 2:00pm - the time at which the auction is to be run. The Exchange knows which Broker have entered trades. Now what will happen at 2:00 pm At 2:00 pm sharp, we at the ECSE will run an automated auction. The Auction System will match the best sell orders (ranked lowest price to highest) versus the best buy orders (ranked highest price to lowest). The auction execution price will be calculated based on the most shares that can be traded using the ranking previously mentioned. Trades will be executed until offered volume exhausts, or all acceptable bids are satisfied. Lower priced bids will be matched first. Orders that are unfilled at the end of the auction can either be dropped from the system if the customer only wanted their order to be good for one day or the system can carry forward this open order to the

6 next business. These open orders that are carried forward will remain open until either matched against another order or until cancelled by the customer. The beauty of the auction is such that the selling investor will never receive less money than their sell order; however, based on the auction price calculated; the investor may receive more money. Similarly, the buying investor will never pay more money than their buy order; however, based on the auction price calculated, the investor may pay less money. What Will Happen After the Auction is Run a.) At 2:15pm, intermediaries will be able to download the matched trade results and know if their orders cleared for the day. The Projected Settlement instructions are sent to Clearing Banks at 2:30pm using ECCB s SWIFT message network. b.) The intermediary retrieves matched trade information from the ECSE and the CSD (Depository). c.) The intermediary reconciles the matched trade information to the customer s order forms and notifies the ECSE of any error conditions. d.) The intermediary, if in a net buying situation, will contact their clearing bank to authorize money be moved from their customer s segregated bank account to the intermediary s bank account. On the next day: a.) The selling broker moves securities from their segregated sub-account at the CSD to their Free sub-account at the CSD. This positions the sold shares for settlement at the CSD. b.) The Depository runs the settlement process at 10:00 am. The CSD moves the securities from the selling intermediary s Free sub-account to the buying intermediary s Free subaccount. c.) Actual Settlement instructions are sent to Clearing Banks at 10:15am using ECCB s SWIFT message network. d.) Settlement is final and irrevocable at 11:30am. e.) The intermediary posts security updates to their internal books and records, such as the Daily Stock Record Activity. f.) The intermediary posts cash updates to their internal books and records, such as the Daily Cash Receipts and Disbursements Blotter. This way we have allowed the transfer of securities and cash between the buyer and seller (represented through a broker-dealer) on the day after the trade was made. CONCLUSION Finally, in closing I would like to offer a few words about our market that makes us proud: We are the first regional market in the Western Hemisphere

7 Our market is built on a sound footing with all the right foundations- a securities regulatory commission, a regional exchange with its subsidiaries- the depository and the registry. A well trained and licensed group of institutions that were put to the toughest scrutiny prior to being accorded the right to serve as intermediaries in our market A well organized regulatory framework with ECSRC at the helm to assert its role as an effective regulator and development agent of the market Our market heralds a new era of corporate governance in the region- through reporting, disclosure, transparency and accountability in the corporate sector Our market was designed and based on global norms and standards of G-30 and IOSCO, etc. We have created an on-line information source on publicly held companies in the region through the ECSIN which is a mini equivalent of the US EDGAR system Our Settlement cycle is based on T+1 Based on state-of-the-art systems and technology solutions Our technology and institutional structure has allowed us to leapfrog other markets by creating a dematerialized environment from day one where there will be no need for physical securities. All records and proof ownership will be kept electronically in book entry form at one of our ECSE institutions. This is the wave of the future. Last and the most important of them all- the backing of the ECCB that gives the ECSM the desired credibility in the region. Thank you for your participation today at this historic event that will get the OECS economies closer towards achieving a single financial space within the region.