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Trevor E Blake

ACSDA GENERAL ASSEMBLY PANEL 2: UPDATE ON BONDS. Trevor E Blake. Introduction. The Eastern Caribbean Central Securities Depository (ECCSD) Wholly-owned subsidiary of ECSE Services the Eastern Caribbean Securities Market (ECSM) & Regional Government Securities Market (RGSM)

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Trevor E Blake

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  1. ACSDA GENERAL ASSEMBLY PANEL 2: UPDATE ON BONDS Trevor E Blake

  2. Introduction • The Eastern Caribbean Central Securities Depository (ECCSD) • Wholly-owned subsidiary of ECSE • Services the Eastern Caribbean Securities Market (ECSM) & Regional Government Securities Market (RGSM) • Both fully integrated regional markets for 8 member countries of the Eastern Caribbean Currency Union (ECCU) • Anguilla; Antigua & Barbuda; Dominica; Grenada; Montserrat; St Kitts & Nevis; St Lucia; St Vincent & the Grenadines • Common legislation • Common regulatory commission • Common market institutions

  3. The Markets ECSM primary issuance of corporate securities; secondary trading in corporate and sovereign securities RGSM primary issuance of government securities Both markets are fully dematerialized Settlement on T+1 on DVP (model 2) basis Fully electronic Conform to international standards IOSCO, WFE, CPSS

  4. Securities registered • 76 Securities maintained at CSD • 16 Equities • 10 T-bills • 50 Bonds & Notes • 15 Corporate Bonds • 35 Sovereign Bonds & Notes

  5. Listed Securities • 57 Securities listed on ECSE • 13 Equities • 44 Debt Securities • Fixed Income Securities dominate the market • Led by Sovereign debt

  6. Listed Sovereign Debt Securities • Sovereign debt securities • 6 T-Bills • 8 T-Notes • 26 Bonds • One Government dominates the market

  7. Bond Market Activity • Primary • RGSM • Regular issues on market • ECSM • 1 corporate issuer in 2010 • Secondary • Activity led by Sovereigns

  8. CSD Activity • CSD clearing & settlement activity dominated by debt securities • Led by T-Bills • Monthly issues & redemptions • Income from Bonds account for 56.8% of overall income

  9. Bond Markets • Opportunities • Significant Growth Potential • Sovereigns • Of 8 ECCU Governments, only 6 have securities listed • Only 4 currently active on RGSM • Central Bank encouraging all 8 Governments to participate • Corporates • Only 2 companies have issued bonds • Currently only 1 regular issuer • Commercial paper also a possibility

  10. Bond Markets • Challenges • Sovereigns • Maintenance of sustainable debt levels • Obtaining credit rating • Meeting disclosure requirements • timeliness • Corporates • Convincing companies of benefits of issuing debt direct to market • Attractive lending rates offered by banks • Cultural factors • financial system traditionally bank-centric • Obtaining credit ratings • Investor relations

  11. CSD-Central Bank Interaction • Settlement Process • Funds settlement • effected through a network of clearing banks • within the RTGS administered by the Central Bank • Each broker must designate a clearing bank that is a part of Central Bank clearing house • CSD has settlement account at Central Bank • Settlement in Central Bank money • Settlement on DVP Model 2 basis • Securities settled on trade-by-trade (gross) basis • Net money settlement

  12. CSD-Central Bank Interaction • RGSM • Central Bank as Fiscal Agent of Governments • Issue & Registration of Securities • Central Bank liaise with CSD on all Governments’ market issues • Central Bank is auctioneer for primary issues • Proceeds of auctions settled to Governments’ securities accounts at Central Bank • processing Corporate actions • Payment on Sovereign debt securities processed through Central Bank • Governments provide funds in account at Central Bank for • Semi-annual interest payment • Redemption of principle on amortization and maturity

  13. Conclusion • Markets in Eastern Caribbean dominated by debt instruments • Sovereign debt represent • majority of listings on market • majority of registration in CSD • Major part of market activity • Bonds, both corporate and sovereign, contribute to significant portion of CSD income • Considerable scope for further growth in both corporate and sovereign bond markets • Need to convince companies to by-pass banks and issue debt in market • Governments need to maintain sustainable debt levels; obtain ratings and to provide more timely information to market • Close collaboration with Central Bank essential in multi-country environment

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