The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Fresh from the listing of its first SMART Fund, the Bahamas International Securities Exchange (BISX) yesterday urged local financial services practitioners to drive clients to it, adding: “The business comes here and lists somewhere else.”

Keith Davies, BISX’s chief executive, told Tribune Business that the exchange planned to work more closely with the Securities Commission to ensure it approached any new investment funds domiciling in the Bahamas for listing on the exchange.

Disclosing that BISX had “some additional funds” moving towards listing on its mutual funds tier, and was anticipating one new ‘sponsor member’ to take this total to six, Mr Davies said the initial listing could create a ‘track record’ that paved the way for many more SMART funds.

These funds, created initially as an alternative private wealth management product for high net worth clients, have been the major growth area for the Bahamian investment funds sector over the past five years.

BISX executives yesterday said that of the 32 pages of registered investment funds listed on the Securities Commission’s website, around 50 per cent of the funds listed on each page were SMART funds. As a “back of the envelope” calculation, this meant there were around 300 SMART funds domiciled in the Bahamas.

“One of the things we’re going to do is work with the Securities Commission to find out about the funds they approve on a regular basis, and take the next step to directly contact those funds, those administrators, to attract them to list on the exchange,” Mr Davies told Tribune Business.

“We’re in competition with other markets around the world, but they’re here and we want to take advantage of them.”

Earlier, addressing the Certified Financial Analyst (CFA) Society of the Bahamas, Mr Davies said the growth of BISX’s SMART Fund listings, and that of the exchange and capital markets in general, would “only happen if financial providers bring us the business”.

He added: “Every piece of business that comes through your door, keep it here. The business comes here, but lists somewhere else.”

Mr Davies indicated that doing this was vital to the long-term growth and development of the Bahamian capital markets, particularly in overcoming the liquidity problems caused by a small investor and population base, and narrow ‘main board equity listings’ options.

Noting that the Labour Force was around 165,000 strong, Mr Davies argued that probably only 40,000-41,000 of those had the financial wherewithal to invest in listed stocks.

Disclosing that there were just 3,000-4,000 active brokerage accounts to highlight the market’s low liquidity levels, Mr Davies said many Bahamians of means were “afraid” to participate in the buying of stocks because it was an unfamiliar concept to them.

Noting that the process of ‘going public’ was not something a company “backs into”, Mr Davies said listing on BISX’s ‘main equities board’ was probably suitable for less than 1 per cent of this nation’s companies.

The need to grow and enlarge the market, Mr Davies indicated, was why he was exploring the idea of establishing a commercial paper market and junior listing tier for small firms, via his Small Alternative Market.

Mr Davies said the commercial paper market would not be targeted at small businesses, but would instead target listed companies, those in regulated industries and firms that had audited financial information that was easily accessible.

He added that “qualified borrowers” would issue securities for periods ranging from one month to two years.

“Borrowers will auction notes over the exchange, and the notes will be listed and traded on the exchange until maturity,” Mr Davies said.

He suggested that the Bahamas should explore the option of “ongoing shelf registrations”, which would allow issuers to do a ‘rolling series’ of issues without repeatedly going through the Securities Commission’s approval process.

“In the long-term, I see a facility where users file a registration form, similar to a shelf registration in the US, to shorten their time to market,” Mr Davies said.