The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The listing of $3.467 billion in long-term government debt would represent “the single biggest event in the history of the Bahamas International Securities Exchange”, its chief executive said yesterday, more than doubling its market capitalisation to over $6 billion.

Keith Davies told Tribune Business he “truly believes” the listing, and trading, of Bahamas Government Registered Stock (BGRS) on BISX would eventually happen - although he cannot say when.

Acknowledging that the decision-making power lay entirely with the Government, Mr Davies said that once he received a positive answer, BISX would be able to facilitate the listing of its securities “in a very short period of time”.

Implying that BISX had done everything necessary on its part to make it happen, Mr Davies told Tribune Business: “The listing of government securities would be the single biggest event in the history of the exchange.

“I truly believe this is something that will happen for the exchange. I believe it will happen. This is a position I’ve held going back many years.”

The listing of the Government’s debt securities has been a key objective of BISX from the day it began live trading over 13 years ago, on May 12, 2000.

The exchange’s initial business plan was heavily predicated on getting that business, and when it failed to materialise BISX’s financial projections were thrown badly out, leading to several years of financial strife.

Despite indications that the Government was moving in the direction of listing its long-term debt on BISX, and the secondary listing of one international bond issue on the exchange, successive FNM and PLP administrations have failed to follow through on the final step.

Government debt securities are currently issued through the Central Bank of the Bahamas’ auction system, but their listing on BISX would create more transparency and better price discovery, facilitating their secondary trading in a regulated market.

And, as the largest securities issuer, the Government’s securities would also help create a yield curve for the pricing of all other debt securities in the Bahamian market.

“From day one, the benchmark for securities in the country is government securities,” Mr Davies said.

“I’m patiently waiting on the Government to make a decision to go forward, and we’re prepared. This is an issue we’ve worked on for years. The mechanisms are in place for us to do this, and do it in a very short period of time.”

The Government’s total debt stood at $5.227 billion at end-June 2013, and of this sum, BGRS issues combined for $3.467 billion.

The latter figure exceeds BISX’s current $3 billion market capitalisation, and its listing would serve to broaden and deepen the Bahamian capital markets, boosting liquidity and trading activity while also diversifying investor options.

Still, Mr Davies told a Certified Financial Analysts (CFA) Society of the Bahamas’ luncheon yesterday that BISX’s market capitalisation had more than quadrupled from the $639 million and nine stocks it started with in 2000.

Arguing that BISX was simply a facilitator, providing the environment and regulated platform for the listing and trading of securities to take place, Mr Davies said its inception represented a major improvement on the over-the-counter markets that existed before.

Under those conditions, Mr Davies said there we numerous “insular markets’ where different closing prices for the same stocks existed, and different information was made available to investors.

“One of the broker/dealer members referred to it as the ‘Wild, Wild West’,” Mr Davies said, “as you’d literally stick your finger in the air to determine the price. That’s their words, not mine. Things are very different today.”