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Cross Border Settlement

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  1. Cross Border Settlement Presented by: Mrs. Beulah Johnson Equity Operations Manager

  2. About the JCSD • A wholly owned subsidiary of the Jamaica Stock Exchange (JSE) and is located in Kingston, Jamaica W.I • Began its operations in June of 1998 • 45 companies listed on the Exchange with over 60,000 clients in the JCSD

  3. How Cross Border relationships began • GraceKennedy Limited created history by becoming the first Jamaican company to be listed on the Barbados Stock Exchange and the Trinidad & Tobago Stock Exchange

  4. How Cross Border relationships began • Other cross-listed companies on the Barbados, Jamaica and Trinidad and Tobago Stock Exchanges are:- • Jamaica Money Market Brokers Limited • National Commercial Bank Jamaica Ltd. • Dehring, Bunting & Golding Ltd • Capital & Credit Merchant Bank Limited

  5. How Cross Border relationships began – Part 2 • Other cross-listed companies on the Barbados, Jamaica and Trinidad and Tobago Stock Exchanges are:- • First Caribbean Int’l Bank • RBTT Financial Holdings Ltd. • Trinidad Cement Limited • Guardian Holdings Limited

  6. Current Settlement Process • Optimization of market opportunities required speedy movement of shares across borders • Inter-CSD process evolved • Shares transferred immediately after confirmation of ownership • Physical certificates required to complete process

  7. Caribbean Exchanges Network (CXN) • Region actively pursuing establishment of a Caribbean Exchanges Network (CXN) • First phase involves an alliance of three exchanges Barbados, Jamaica and Trinidad and Tobago

  8. Basic Objectives of the CXN • To provide an additional channel for encouraging and mobilizing domestic savings • To foster the growth of the domestic financial services sector

  9. Basic Objectives of the CXN – Part 2 • To provide savers with greater opportunities to protect themselves against inflation • To increase the overall efficiency of investment • To help reduce corporate dependence on borrowing and improve the gearing of the Regional corporate sector

  10. CXN Network Trinidad Barbados Cayman Eastern Caribbean Dutch West Indies Jamaica Structure of the CXN • Currently made up of 3 Member Countries – Barbados, Jamaica, and Trinidad & Tobago • Exchanges utilize a common trading and settlement platform - represents phase 1 of the CXN • Connection to each exchange is via high speed link • Local markets continue to exist in present form

  11. CXN Network Trinidad Barbados Cayman Eastern Caribbean Dutch West Indies Jamaica Structure of the CXN Part 2 • Facilitate trading in other jurisdictions • Members are bound by agreements and CXN Access rules • Open to other Regional countries through a Deed of Accession. Brokers to establish accounts in the respective Depositories to facilitate trading and settlement

  12. Role of the Depositories • Facilitate clearance and settlement of regional trades through:- • Settlement agreement with the chosen settlement bank • One common Inter-CSD Depository Agreement to cover treatment of securities, clearance and settlement • Risk Management, including Reconciliations and Reports

  13. Role of the Depositories – Part 2 • Only upon fund settlement will transfer of securities will be done • CSD will guarantee settlement if member defaults and will assume market to market risk, then look to recover from the member • A Common Settlement Cycle T+3 • Funds Clearance will be CSD to CSD , CSD to Members

  14. Fund Settlement • CXN will enter into an agreement with a settlement bank similar to the Central Bank • Settlement bank must have branches or affiliates in all participating regions • Each CSD and Broker will have account (s) with bank in their country • Each CSD will also have an account in the settlement bank of the other regions

  15. Fund Settlement - Part 2 • The bank will act upon instructions from the respective CSDs for transfer of funds CSD to CSD, CSD to Broker • Notification may be in the form of email, fax, or any other electronic method that is agreed on between the parties. The respective CSDs would provide a settlement report

  16. Responsibility of Broker, CSD and Bank after a trade Illustration: Barbadian investor purchases stock listed on JSE • Trade confirmation is received by Barbadian Broker • Barbados Broker funds his BCSD account domiciled in the settlement bank for his net to pay value • The settlement bank sources the requisite currency for settlement and deposits to the JCSD account in Barbados • On T+3 the bank then transfers the funds into the JCSD account in Jamaica

  17. Responsibilities after a trade - Part 2 • The JCSD verifies the transfer and instructs the bank to distribute to the Jamaican Broker account for his net to receive value • Trades will be settled T+ 3

  18. Fund Settlement Overview Jamaican Broker Account at Settlement Bank in Jamaica Barbadian Broker Account at Settlement Bank in Barbados JCSD Account at Settlement Banks in the participating countries (Barbados/Jamaica/Trinidad) BCSD Account at Settlement Banks in the participating countries (Barbados/Jamaica/Trinidad) J$ BD$ J$:B$ B$:TT$ TTCSD Account at Settlement Banks in the participating countries (Barbados/Jamaica/Trinidad) TT$:J$ T&T Broker Account at Settlement Bank in Trinidad & Tobago TT$ Settlement Bank Conversion and Transfer of Relevant Currency. NB. CSDs may have to maintain two accounts if deemed necessary

  19. Who has jurisdiction over a trade? • The domiciled Exchange on which the trade is executed and settled has jurisdiction • Purchase / Sell Transaction would be recorded in the primary market with the purchaser paying and the seller receiving

  20. Inventory Positions In respect to client holdings: • Client needs to establish accounts in all jurisdiction for trading • All positions would be held in the depository of the country where the security is traded • Clients will get a statement through their own broker and the CSD

  21. Benefits for Cross Border Trading • Access to 100+ stocks in 3 markets • Larger pool of investors • No need to transfer shares across borders