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Five questions with Michelle Persad, CEO, T&T Stock Exchange
1. In 2016, the TTSE witnessed a decline in total trades and total value relative to 2015. No doubt much of this could be attributed to the prevailing economic climate and decline in listings on the exchange. With 2017 coming to an end, what has been the overall level of activity on the exchange this year relative to 2016?
Our main thrust at the TTSE is market development. We have been very pleased to host some major listings in recent years.
In our market, investors tend to hold on to their investments, whether listed or private placement, mainly due to challenges in finding alternatives. Therefore, market tends to revert to its average trend in activity when there are no new issues. This led to trading activity in 2016 that was lower when compared to the flurry of activity with the $1.5 billion TTNGL Initial Public Offering in 2015.
In 2017, we were pleased to host additional offerings from TTNGL and from First Citizens. These types of sizeable listings of profitable companies are a boon to the economy in many ways as investors get opportunities for investing for their future.
This can be for their retirement or investing for the benefit of their family, as institutional investors like our NIB and pension plans are able to deploy cash that too often remains un-invested. This can result in possible shortfalls for future liabilities and as government finds a mechanism to meet its funding requirements and streamlines its involvement in commercial entities.
Thus far, in 2017 trading activity remains robust with total activity to date at $1.03 billion, just 11 per cent lower than activity for all of 2016.
There has been a decline in market values as investors price in the effect of what has been decreasing profits in some listed companies. Also, the index has been buoyed by the upward momentum in cross-listed shares as the T&T market remains an excellent location for regional entities who aim for multiple listings. We see this period as part of a cyclical pattern and continue to work assiduously to encourage the signs of growing interest in the stock market, both from the investor side and from entities interested in raising capital.
2. There are three major exchanges in the Caribbean: T&T, Jamaica, and Barbados. What is the communication/collaboration like—if any—across these exchanges and are there any plans to move to a regional stock exchange?
Regional trading is an objective that makes sense for the JSE, BSE and TTSE and we see this as a real possibility. We have considered the harmonisation of activity whereby traders from any of the three jurisdictions may trade in any other. This has come up in discussions as something the three of us (stock exchanges) see as a viable goal.
We have regular communication and recently completed the joint implementation of a new trading platform and host infrastructure which was only possible through ongoing and open collaboration.
I am very pleased with the level of communication and co-operation that has been taking place throughout the experience and in discussions on other upcoming initiatives.
3. Many people in T&T lack an understanding of how the stock exchange operates. What sort of activity has the exchange embarked on to sensitise the public about the workings of the stock exchange and potential benefits for them?
It is very important that potential investors understand the basics of the stock market, the characteristics of traded shares and the process for investing.
Institutional investors such as pension plans and mutual funds understand the market as it is their area of focus and expertise.
Smaller investors need to build their knowledge and the most successful individual investors are the ones who have an understanding of how different news may affect the market particular stocks and, of course, continually inform themselves about the companies in which they invest.
We have been conducting various outreach initiatives whereby we present information on the stock market and investing to audiences such as schools, university students, groups of employees etc.\
For the year, we have completed four such programmes and we have found the response very appreciative and engaging.
We have also partnered with the T&T Securities and Exchange Commission (SEC) to sponsor prizes and provide support for various competitions which are geared towards building this knowledge and again we find the response reflective of a very excited and interested public of young investors.
4. The local stock exchange is perceived as being “illiquid”.
How is this perception being addressed and what sort of initiatives are being undertaken to drive more activity/listings on the exchange?
We have been taking a multi-pronged approach.
1. Raising awareness of the benefits of listing: increasing our one-on-one marketing outreach and maintaining a close collaboration with potential issuers and their advisers.
A major added benefit available to small- and medium-sized businesses is access to a much lower tax rate if listed on the stock exchange. Such an opportunity is ideal for the company that wishes to raise capital whether for expansion or for reorganising ownership in a long standing family business. This has established a trend of profitability.
Such a company can avail itself of a tax rate of 10 per cent instead of 25 or 30 per cent for a period of five years, in addition to the benefits of raising capital.
2. As part of our market development thrust, we also wish to increase the avenues for trading, looking into online trading which we see as necessary for the current and moreso the upcoming investing public, as well as broadening the scope of products available.
3. We have been placing focus on our regulatory activities ensuring that transparency in trading activity may be more and more visible. Our current board of directors initiated measures to increase transparency in trading activities and our chairman, and vice chairman, with the support executive management, are working with the existing rules and the SEC to allow less room for scepticism about the way trading is conducted.
Online trading, efficiency in order execution and closer collaboration with stockbrokers and securities dealers are measures being implemented to increase activity.
5. Technology has made trading on international exchanges more accessible to wider audiences. Has the TTSE explored replicating any of these technological platforms to facilitate trading in T&T?
Making the process of trading easier for investors is of great importance to us and, with the scope allowed by our new trading system recently implemented, we see online trading as a real possibility in the near future.
While investors will always need a broker as a conduit and support in conducting trades, the benefits of online trading are clearly of great value to the average person who now expects more autonomy, allowing them to conduct most transactions at their personal computer or on their mobile device.
Progress in technology has already allowed us to offer investors greater scope, one example being custody of international assets through our subsidiary the T&T Central Depository (TTCD) in partnership with international custodian Euroclear, allowing investors to use their local brokers for purchasing international assets which can be held in custody through TTCD.
With such an arrangement whereby a local entity provides custody facilities within our market, there is no need to lodge foreign assets elsewhere.
This arrangement is also opportune for investors now exploring the international securities market where there may be challenges in opening foreign brokerage accounts.
Deputy Head of News-Business
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