The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) is “in the final stages” of preparing to list and trade billions in government debt - a move its top executive yesterday hailed as “a watershed”.

Keith Davies told Tribune Business that the anticipated listing of 100 separate Bahamas Government Registered Stock (BGRS) and Bahamas Government Stock (BGS) debt tranches represented a “game changer” for the exchange after a near two-decade wait for this moment to arrive.

He added the “entire purpose of the exchange comes full circle” once this comes to fruition, as it will give BISX “complete market end to end” in terms of the variety of government and private securities it lists.

The BISX chief executive, while declining to give a date for when the process will be completed, said the exchange was working closely with the Central Bank of the Bahamas, the Securities Commission and the Government to ensure the transition was as smooth as possible.

Reiterating that the listing of government debt via the exchange will “improve and modernise” the wider Bahamian capital markets, Mr Davies added that all parties were working “hand in glove” to ensure market participants - including broker/dealers and investors - fully understand how the market will work once trading begin.

“We are in the final stages,” he confirmed to Tribune Business, “and want to get it out as soon as possible. That is our goal, and the Government and Central Bank’s goal. This is huge, a watershed moment.

“It’s a game changer for us because it brings full circle the entire purpose of the exchange’s existence from inception. That is what it means to us. We have a complete market end-to-end, with government securities, private equity, companies going public and the mutual fund aspect.

“We’re doing a lot to facilitate that and make a capital market that functions properly. It’s a step in the right direction that the country and capital markets need to continue to develop the market.”

Government debt securities form the largest component of the Bahamian capital markets in terms of both value and number of issues. Both indicators have increased significantly since 2000 as a result of the multi-million, nine-figure annual deficits racked up by successive administrations, and the need to finance them with debt issues.

As a result, the collective value of the securities set to be listed on BISX is likely to at least be in the $3bn to $4bn range, even though shorter-term Treasury Bills are not included.

Mr Davies described the government securities segment as an exchange’s “most active market” because it is so broad and deep. “We know activity is going to increase in the market because of this,” he told Tribune Business.

“It’s going to stimulate a lot of growth, set a lot of benchmarks. We are the standard bearer today for all information on equities in this country. We will be the same for government securities moving forward. That is very valuable for a country.”

The Central Bank of The Bahamas, in unveiling the new structure aimed at creating “a more efficient and vibrant” market for Government debt securities last November, said the BISX listing was due to take effect from January 15, 2019.

While that deadline has been missed, the move is exactly what BISX had been hoping for when it launched operations almost 20 years ago in May 2000, amid expectations that the listing and trading of government debt issues would give it an immediate market that was both broad and deep.

This never happened and, with BISX having ramped up its costs and structure in anticipation, led directly to the Government-led “bail out” - through the Central Bank - some three to four years later that was essential to rescuing the exchange and ensuring its survival.

The Central Bank, meanwhile, said in November that the BISX listing was intended to “promote more efficient market trading and better pricing of the bonds through market bidding”. It was due to create the Bahamas Government Securities Depository (BGSD), which is to act as the “registrar and transfer agent” for government debt, by November 26 last year.

Investors will now have two routes for acquiring government debt - at the time it is issued, or via the “secondary market” that will be created by its listing and trading on BISX.

Detailing the advantages for investors and the wider capital markets, Mr Davies told Tribune Business: “All the elements of an exchange are brought to bear. You have information, transparency in terms of what’s happening in the market and, more importantly, have a place where buyers and sellers can go to list and trade securities.

“You don’t have to guess what’s available. It will be presented in a very transparent fashion, and all persons will have an element of price discovery that didn’t exist before the listing on BISX, and which is vital to the development of the marketplace. It’s a giant step forward. It validates everything we were trying to do and puts us in a position to do even more.”

The BISX chief executive said it had “made tremendous strides” over its first 20 years, adding that it was still “an infant” in stock exchange terms with its present life cycle “a drop in the bucket” compared to more mature rivals.