By Tameka Lundy, The Bahama Journal
The Government of the Bahamas should provide desperately needed support to the Bahamas International Securities Exchange, the Governor of the Central Bank of the Bahamas Julian Francis has opined.
Mr. Francis’ endorsement of a rescue plan for the limping exchange came on Thursday as the government considers a report from the New York consultancy firm, Structured Credit International Corporation, which also recommends a $2 million injection.
“I am of the view that the support that is necessary to restructure BISX and to keep it going, should be provided,” Mr. Francis said on the Love 97 talk show Issues of the Day.
“We can’t abandon BISX today. The development of our domestic capital markets is far too important.”
Five years ago, members of the financial services sector who recognized the advantages of a securities exchange, feverishly lobbied for it. Mr Francis also acknowledged that the exchange’s three-year existence has been fraught with difficulties.
The blacklisting of the Bahamas by the Financial Action Task Force and the delayed privatization of the Bahamas Telecommunications Corporation have not helped, he said. BaTelCo was viewed as an important opportunity to aid BISX’s growth.
“I believe we have to find a way to provide the support which is required to get BISX going. For a small limited economy like ours sometimes the public has to invest in these areas of infrastructure for a period of time to make it work,” the Central Bank Governor said.
The New York consultants said in their assessment that BISX can become a financially viable niche exchange in less than two years if it garners government support, reforms itself and follows a new vision providing innovative value added services.
But the Chairman of the Securities Commission of the Bahamas Jerry Butler, is warning that the current exchange model may not necessarily be a viable option for The Bahamas.
He acknowledged, however, that if the country is to remain a player in the world financial markets, it needs a stock exchange.
“This particular stock exchange called BISX may or may not necessarily be the mechanism that we need to work with,” he said. “But it’s a start.”
“I think that since the current stock exchange is failing, that is an indication that maybe the model we have is not the appropriate model.”
Gripped by serious problems that are threatening its finances and viability, BISX is facing an uncertain future, some financial analysts believe.
But the government is reviewing a Central Bank funded report that recommends the way forward for the exchange which was started three years ago. The consultants said the exchange is practicable and can succeed with the appropriate help.
Sixteen Bahamian registered companies are listed for trading on the BISX
The government has made no decision yet regarding the exchange, the Minister of State in the Ministry of Finance James Smith revealed.
Mr. Butler says a less than desirable volume of trading may also be adversely impacting BISX.
“Most ( of the 16 listed companies) are at least 70 percent owned by wealthy Bahamian families who are not in the mood for buying and selling shares every day,” he said.
He explained that for stock exchanges around the world, a significant portion of the revenue is derived from trading and other related fees and charges.
Mr. Butler also suggested another means of increasing activity; secondary markets for Bahamian Government securities, registered stock and treasury bills.
“If you factor them in, then you might have enough activity being generated to keep a stock exchange, or a group of people who are brokers whether they are over the counter or not, in business,” he said.
BISX officials had initially asked the former Free National Movement government for a two million dollar injection. The new PLP administration is now considering whether the subvention would call for an outright, grant, loan or a guarantee.
“It’s a value judgment,” Minister Smith said. “It’s a question of whether we see in the medium or the long term any value to BISX to the larger economy.”
The fate of the exchange has sparked attention from various members of the financial community, including economist Dr. Gilbert Morris.
He also pointed to problems with the secondary market.
But Dr. Morris also believes that under no circumstances should BISX receive “taxpayer cash unavailable to companies under its stewardship.”
“Some investors may find this harsh,” he said. “However taxpayer funds should not be used to secure the profitability of private investment decisions.”
Responding to whether the country should consider endorsing a regional stock exchange model, Mr. Butler cautioned that even that option should be carefully considered and researched.
