The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) is exploring whether to add carbon trading to its business model, its chief executive pledging: “We’re on it.”

Keith Davies told Tribune Business that the exchange was examining the Carbon Credit Trading Bill, which was last week tabled in the House of Assembly and has been released for industry and public consultation, to determine whether it is something it can facilitate and become involved with.

If BISX is able to provide the necessary mechanism, meet all the regulatory and other requirements, and sees it as a potential new trading activity that can add value to its business, Mr Davies said it will move to exploit the opportunity. He added that among the key issues to resolve is settlement, which involves the clearing of transactions in such manner that the seller receives full payment and the buyer the security they have purchased.

“The short answer is, if we look at any security, yes,” the BISX chief responded when asked by this newspaper if it would explore getting into carbon credit trading. “The long answer is the Bill has been presented, it’s out for consultation by the Securities Commission currently, and what we have to do is look at it to see what is required.

“At the end of the day, a security is a security is a security is a security. The difficulty with any transaction is settlement. The nature of the security is where it is located, who the owners are and how the parties interact with one another. The most important requirements are interaction and settlement, and the means to pay.

“We’ll be reviewing it,” Mr Davies said of the Bill, “and then make a determination as to whether or not we’re able to provide the facility and go from there. I need to look at who the intermediaries are and how they interact. A stock exchange like ours is obviously driven by its members. It’s one thing to have the law, and another thing to have the mechanism.

“It’s something we have to look at to see if we can facilitate it. If it is, we’ll be on it and, if not, we’ll look to see what gaps we can fill. As a national exchange, that’s something we ought to do and will do. Anything we can do to facilitate securities trading is a benefit to us. It will be a collaboration between BISX and its members to ensure we can provide the right services.”

Mr Davies said settlement was critical to the viability of any stock exchange, which involves recognising the identities of both seller and buyer, how much is paid for a particular security and determining “where the security lives” in terms of who has possession of it.

It is unclear, though, where BISX fits in. Jerome Fitzgerald, the Prime Minister’s senior policy adviser, recently said the Government was working with FTX Digital Markets, the Bahamas-domiciled crypto currency exchange, to develop a trading mechanism for the blue carbon credit that this nation hopes to launch this year.

The draft Carbon Credit Trading Bill, designed as another step to facilitate the Government’s ambitions for The Bahamas to become a carbon credit and trading hub, requires that BISX and all potential carbon trading exchanges apply for and become registered with the Securities Commission before starting business.

The must supply “a detailed plan” for how the exchange will operate, as well as the rules governing how carbon credit products will be admitted for listing and trading. All carbon exchange applicants must demonstrate their ability “to meet solvency standards and levels of capital” that will be stipulated by yet-to-be-published regulations, as well showing their controls and systems are robust enough to combat “fraud and market abuse” as well as other risks.

These controls and systems must also be able to “record, store, protect and transmit information”; monitor and effect transactions; settle transactions; and safeguard investor assets. A business continuity plan is also required.

Ryan Pinder, the attorney general, told the Senate during his Budget debate contribution how the Carbon Credit Trading Bill will work. He added: “To advance the monetisation of carbon credits, we will be bringing to Parliament specially-drafted legislation to establish a carbon credit exchange in The Bahamas.

“The desire is to create a regulated framework that will establish The Bahamas as the regional, and hopefully the global, centre for the trade in carbon credits. We will participate in the vertically integrated carbon credit marketplace. The Bahamas is a leader in the world on this issue.”

As for the “monetisation” itself, Mr Pinder added: “We are also working to ensure that our efforts in blue carbon credits can start to be monetised this 2022-2023 fiscal year. We are on track to start our scientific verification exercises and monetisation of our blue carbon credits.”

These credits will be entered into a database until they are ready to be monetised. The Government has already identified $300m in coastal assets it is seeking to offer on the carbon market. The Climate Change and Carbon Market Incentives Bill tabled in April was the first step in securing a carbon credit payment system for the country.

Mr Pinder said: “The development of a leadership position in carbon credits is not merely to provide a framework for revenues to the Government, but it creates a new industry that will be vertically integrated and will present opportunities for Bahamians to participate in every element of the new frontier.

“Bahamian scientists will be trained in the technical components identifying blue carbon sequestration, Bahamian financial services professionals will have opportunities in the new capital markets created. The leadership position of The Bahamas in this area will positively contribute to economic diversification.”

The global carbon credit market focuses primarily on “green” carbon credits that are tied to forests and grasslands. The Bahamas aims to be one of the first countries to begin selling ocean “blue” based credits.