Interview: Subhas Ramkhelawan
To what extent has Trinidad and Tobago achieved capital markets integration with Barbados and Jamaica after adopting the same trading platform?
SUBHAS RAMKHELAWAN: The main challenge is the lack of a unified currency. For a Trinbagonian to buy securities in Jamaica they would have to change T&T dollars into US dollars and then Jamaican dollars. This has proven to be a big issue. The easiest thing to do would be to cross-list all stocks on the T&T, Jamaica and Barbados markets.
But the problem of currency still persists because if a Jamaican holder of a cross-listed stock sells in T&T they would receive T&T dollars, leaving them to find a way to repatriate the funds to Jamaica or change them into hard currency. So we need to work on how to clear and settle some of those flows. Nevertheless, cross-listing is far more realistic than attempting to develop one single, regional stock exchange at this stage. In the future I expect the three core exchanges to be 100% cross-listed. The exchanges would need to remove or minimise their cross listing fees and make their money through transaction activity instead. Once we have taken this step we can talk about adding additional tiers.
The new trading platform can deal with multiple currencies so there is no impediment to creating tiers on the stock exchange, paving the way for Guyana and Suriname to outsource their exchanges. Their firms could list stock here in Guyanese and Surinamese currency and be subject to their own countries’ regulations.
What potential is there for US dollar-denominated products on the market?
RAMKHELAWAN: Investors here in T&T hold a significant amount in US dollars in the order of 20% of total deposits in the banking system, but they are trapped by very low rates of return from bank deposits and money market funds. The local stock exchange has a sub-custodial arrangements relationship with Euroclear, so there is opportunity for local access and activity in global securities under international custodianship. The exchange has recently put in place significant infrastructure, so the framework is there to trade US dollar securities on the T&T stock market.
Consequently, there is no impediment to US dollar-denominated stocks, bonds and equities because the platform is there to accommodate them. The greatest enemy of such innovation is lethargy, which we have to circumvent. The other factor is that our market will have to come to grips with dealing with the individual or retail sector. How we move them from a bank deposit to a mutual fund to other structured products and US dollar-denominated bonds and other securities, that are not necessarily issued from T&T, will be a challenge.
On the policy side it makes sense to promote US dollar products, which will eventually lead to retention of US dollar assets by local investors. How policymakers look at this is crucial, as it will make the difference in how operators respond to incentivisation or the removal of impediments. The money is already in the hands of local investors, the question is how they would generate value added that would then return to the country.
How feasible is it for T&T to emulate the success of the Jamaica Stock Exchange in attracting small and medium-sized enterprises (SMEs) to list?
RAMKHELAWAN: Many of the Jamaican SMEs that are listed were motivated by tax advantages rather than capital raising. We created a framework for SMEs some four years ago, which was subsequently revised with enhanced incentives. To date, no SMEs have listed. Part of the challenge is that the stock exchange disclosure requirements are not favoured by many of the firms that would benefit from raising capital. But part of the issue lies with tax declarations or lack thereof. SMEs do not have the same incentive to list as they do in Jamaica and are unlikely to give our capital markets the boost they need. Rather, we should look to increase cross-Caribbean activity and put in place, inter alia, infrastructure to create tiers for Guyana and Suriname.
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