The T&T Exchange Ltd (TTSE) is now demutualised with 32 shareholders owning 1,545,600 issued shares and equity of $60 million. Following a shareholder certificate handover breakfast ceremony at the Courtyard Marriott Port-of-Spain hotel yesterday, TTSE chief executive officer Wainwright Iton explained that demutualisation refers to the change in legal status of an exchange from a mutual association with one vote per member into a for-profit limited liability company with one vote per share. In layman’s terms, the TTSE crept an inch closer to being more democratically and transparently governed. The TTSE board said in a statement that it “expects that in the medium term, it would be in a position to offer shares to the public and, ultimately, to be listed on the exchange.” Iton said, “Exchanges began as what we call mutual companies, owned by their broker members and that has all kinds of perceptions attached to it, including that the exchange is a reserve for a small number of people. So 50-60 years ago, that might have been okay, but not in the 21st century.”
The new development has been years in the making. The securities market existed informally in T&T “for well over 20 years prior to the opening of the T&T Stock Exchange,” the TTSE says on its “History” Web page. The TTSE was formally established in 1981 by the Securities Industry Act of the same year. From that year until 1997, the exchange was funded by the Central Bank of T&T “and actually housed in the bank’s premises,” the TTSE said in a press brief distributed to the media at the breakfast event. In 1997, the exchange was incorporated as a private limited liability company and the existing assets were transferred to this new entity, the TTSE said in its brief. At the end of December 1997, the board of directors was comprised of five stockbrokers only. By 1998, the board had been expanded to ten members: five elected by the brokers and five by the listed companies. In 2003, new Articles of Amendment provided for an 11-member board comprising four persons from listed companies, four from among the stockbrokers and three independent directors. This structure became effective in 2004 and remained in effect up to April 4, 2012. “In the latter half of the 1990s, a universal trend began where stock exchanges the world over started converting from members-owned --mutual companies -- to demutualised, for-profit companies,” the TTSE said in its brief.
The board of directors of the exchange committed to demutualise the company in 2008. From 2000 to April 2012, the TTSE had two classes of shares: “A” shares owned by the brokers and “B” shares owned by the listed companies. Each class of shares elected four directors to the board along with three independent members. The assets of the exchange were owned 50 per cent by brokers and 50 per cent by the listed companies. At a special shareholders meeting on April 4, 2012, a new capital structure was approved. Class “A” and “B” were cancelled and a new class of common shares was created to replace them. At the point of cancellation, there were 70 “A” shares in existence and 69 “B” shares. To maintain the 50-50 per cent ownership structure, one “A” share was converted to 11,040 common shares and one “B” share was converted to 11,200 common shares. The shares are freely transferrable, but the Articles of Amendment prescribe a 20 per cent shareholder ceiling, which means no shareholder can own more than 20 per cent of the issued shares at any time. If a shareholder were to exceed this threshold, the company has the right to sell the extra shares. The shareholder cannot vote with the extra shares. Stock exchanges that have already demutualised are the Australian Stock Exchange, Nasdaq, New York Stock Exchange, Euronext, London Stock Exchange, Nasdaq OMX Nordic Exchanges, Tokyo Stock Exchange, Toronto Stock Exchange, Six Swiss Exchange, Warsaw Stock Exchange, Jamaica Stock Exchange, Eastern Caribbean Securities Exchange, and the Bahamian Stock Exchange.