Cross Border Settlement

Cross Border Settlement

Presented by: Mrs. Beulah Johnson

Equity Operations Manager

About the JCSDAbout 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

How Cross Border relationships beganHow 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

How Cross Border relationships beganHow 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

How Cross Border relationships began – Part

2

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

Current Settlement Process

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

Caribbean Exchanges Network (CXN)

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

Basic Objectives of the CXN

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

Basic Objectives of the CXN – Part 2

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

Structure of the CXNStructure 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

CXN CXN NetworkNetwork

JamaicaJamaica

BarbadosBarbados

TrinidadTrinidad

CaymanCayman

Dutch West IndiesDutch West Indies

Structure of the CXN Part 2

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

CXN CXN NetworkNetwork

JamaicaJamaica

BarbadosBarbados

TrinidadTrinidad

CaymanCayman

Dutch West IndiesDutch West Indies

Role of the Depositories

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

Role of the Depositories – Part 2

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

Fund SettlementFund 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

Fund Settlement - Part 2

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

Responsibility of Broker, CSD and

Bank after a trade

Responsibility of Broker, CSD and

Bank after a tradeIllustration: 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

Responsibilities after a trade - Part

2

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

Fund Settlement OverviewFund Settlement OverviewJamaican Broker

Account at Settlement Bank in Jamaica

T&T Broker Account at Settlement Bank in Trinidad & Tobago

Barbadian Broker Account at

Settlement Bank in Barbados

Settlement Bank Conversion and Transfer of Relevant Currency.

NB. CSDs may have to maintain two accounts if deemed necessary

J$

TT$

BD$JCSD Account at

Settlement Banks in the participating

countries (Barbados/Jamaica/Trinidad)

BCSD Account at Settlement Banks in

the participating countries

(Barbados/Jamaica/Trinidad)

TTCSD Account at Settlement Banks in

the participating countries

(Barbados/Jamaica/Trinidad)

TT$:J$

J$:B$

B$:TT$

Who has jurisdiction over a trade?

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

Inventory PositionsInventory 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

Benefits for Cross Border Trading

Benefits for Cross Border Trading

Access to 100+ stocks in 3 marketsLarger pool of investors No need to transfer shares across

borders