The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange’s (BISX) global expansion plans are inextricably linked to this nation achieving the top international securities industry ranking, its chief executive saying the exchange’s “future growth and development” depended upon it.

Keith Davies told Tribune Business that BISX achieving any further international recognitions was “a moot point” until the Bahamas achieved ‘Category A’ status with the International Organisation of Securities Commissions (IOSCO), the association of global securities industry regulators.

This status acts as the benchmark by which other jurisdictions provide access to a nation’s securities industry participants and products, and until the Bahamas achieves a ‘Category A’ ranking, there is the prospect of some countries placing impediments in the way.

This, of course, acts as a potential barrier to BISX’s access to overseas markets, something that would inhibit a business strategy that has always viewed international expansion as key to the exchange’s success, given the relatively limited size of the Bahamian capital markets.

“As we continue to develop; formalise and grow the Bahamian capital markets, they are only a certain size,” Mr Davies told Tribune Business.

“The future growth and development of BISX and the capital markets in this country will be to the extent we can introduce a true international side to the market.”

To aid its attempt to develop a niche in the international capital markets, BISX has already obtained recognitions from three foreign regulators - the US Securities & Exchange Commission (SEC); the UK’s Her Majesty’s Revenue and Customs (HMRC); and IOSCO itself.

But, until ‘Category A’ status was achieved with the latter, BISX’s bid to achieve recognitions from other overseas regulators and exchanges was likely to be stymied.

“We want to form relationships with Latin American countries. Brazil and Panama come to mind off the top, but there are others,” Mr Davies told Tribune Business.

“We’ve had our conversations with Brazil, but until the Bahamas gains ‘Category A’ status from IOSCO, it’s a moot point. We can’t go any further until that is done.”

Mr Davies described ‘Category A’ status as an “international regulatory benchmark that is a credibility signal you are fully compliant with international standards”.

He added: “It is a benchmark used by regulators in other jurisdictions to determine who comes in, that you can access their’s.

“For us, gaining ‘Category A’ status enables us to expand our recognitions and product base into new jurisdictions. That will benefit BISX, benefit its members and benefit the capital markets and the jurisdiction.

“We are encouraged the Securities Commission is taking proactive steps to seek and achieve ‘Category A’ status, and hope it happens sooner rather than later.”

Given BISX’s size, and that it was “already behind on the totem pole” compared to the development of many other stock exchanges, Mr Davies said it had no choice but to be fully compliant with international standards.

Pointing out that it was also vital to BISX’s competitiveness, the chief executive added: “We need to do the things necessary to be competitive, because we’re not at the size to be competitive. Getting it right, the small things, shows you’re OK.”

Mr Davies said BISX’s international strategy aimed to find a niche where the exchange, and the Bahamas, could establish a presence.

“For us, a $50 million deal is manna,” he told Tribune Business. “For other exchanges it’s $500 million, $1 billion. We’re looking for opportunities that may not be the focus, the sweet spot for other exchanges. We’ve got to find our sweet spot.”

BISX’s international strategy is contained in its BISX Global initiative, which Mr Davies said had undergone some changes in response to changing global financial dynamics following the 2008 ‘credit crunch’ and global recession.

Disclosing that the exchange was working on an initiative related to BISX Global, which he declined to divulge, Mr Davies said: “BISX Global is one of those things we’re looking to expand and develop. It’s morphed over the years, and continued to morph a little bit more.”

When launched in 2008, just prior to the financial crisis and Lehman Brothers collapse, BISX Global was an attempt to get international capital markets players to use the exchange for niche, derivative-type products.

Indicating that derivatives remain a focus, Mr Davies said: “BISX Global was designed to introduce new products, players and services to the market, and that concept is still there.

“That same year we launched the world changed. Our partners and the exchange realised that, and we’re looking to create derivatives out of it.

“We are working on something right now that will allow us to capitalise on the changes taking place in the international arena, using the recognitions we have.

“The concept is one that people find very interesting. The key is finding our niche with respect to developing the market and benefiting all sides - the international players, BISX and the members.”