The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based broker/dealer yesterday said it had resorted to pay and working hour cuts to combat a 50 per cent decline in trading volumes, adding that Immigration policies were making it hard to attract top-quality traders.

Craig Lines, general manager of LOM Securities (Bahamas), told Tribune Business that Bahamian Immigration policy was creating “barriers to entry” and inhibiting “free access to human capital”, preventing his firm and other broker/dealers from recruiting in the same way they did in New York or London.

Acknowledging that the same challenges occurred among the Bahamas’ Caribbean international financial centre competitors, namely Bermuda and the Cayman Islands, Mr Lines said all three faced the dilemma of the best economic policies not being politically viable.

Disclosing to Tribune Business that he himself had taken a cut in base pay, and that staff at LOM’s three-strong Bahamas office had been given the option of taking a day off per week, Mr Lines said cost-cutting had been forced on the company group-wide due to reduced trading volumes.

“We’re a trading company, and we make money every time someone does a transaction, buying or selling something on the market,” he explained. “We make a commission.

“What has happened is that volumes on the market globally are off 50 per cent; the trading volumes. They’re very, very light. Especially through the summer months, they’re extremely light.”

He added: “This year, trading volumes have been off by between 40-50 per cent depending on the market. The only control we have is cost-cutting, and making systems as efficient as possible.”

Pointing out that this situation was “not unique to LOM” and being experienced by broker/dealers throughout the world, Mr Lines said the Bahamian broker had also abandoned plans to increase staff levels.

While the Bermuda-headquartered group’s asset management side was growing, Mr Lines base its commission-based revenues were down due to the fact clients were doing less with those assets than in the past.

Rather than engage in heightened levels of trading, clients were investing in lower margin activities, such as holding cash or placing monies in money market mutual funds.

“Commissions from trading have been pummelled, simply put,” Mr Lines told Tribune Business.

“You line that up with compliance and other expenses being put on companies, and push back from clients not wanting to pay as much for trading. It’s a perfect storm for brokerage operations.”

But, despite the challenges, Mr Lines said LOM had no intention of walking away from the Bahamas. “We have plant here, I have a home here. We’re committed to the Bahamas for the long-term,” he added.

However, LOM Securities (Bahamas) and other international broker/dealers were also challenged by the nation’s Immigration policy.

The industry’s typical recruitment policy in New York and London was to hire 10-15 persons as potential traders/brokers at the same time, then put them in a competitive environment where it was “survival of the fittest” and only the best were taken on.

Normally, eight-10 of those initially recruited are let go after several months, but Mr Lines said Bahamian Immigration policies prevented such a process here.

“One of the problems offshore is with Immigration policy,” Mr Lines added. “Brokers are very hard to find and bring on board because there are barriers to entry due to Immigration policies.

“With the Immigration policy here, we can’t do as in New York or London. In Bermuda and Cayman, it’s the same way. They’re closed shops really, and that makes it more of a challenge for free access to human capital, which is key for any business.”

In any event, Mr Lines said offshore broker/dealers also found it difficult to convince good brokers to give up their existing business books and switch to new jurisdictions, where they had to start afresh.

Suggesting that Immigration obstacles should be removed and the jobs market opened up to more outside competition, as this would ultimately lead to more employment and business activity in the Bahamas, Mr Lines acknowledged this was unlikely to happen.

“All islands are stuck between what economically makes most sense and what is most politically viable for them,” he told Tribune Business.

“Economically, it makes most sense if the country has full employment, you open up the jobs market, and there is more employment, but that’s not doable politically. It does not make sense politically, when it makes most sense economically.”

Mr Lines added that when jobs were lost in the financial services industry, it was “very hard to get that job back”, not just in the Bahamas but globally.