JSE private placement platform by year end

The Jamaica Stock Exchange JSE, expects in a matter of days to launch a portal for private bonds issued under exemption of public disclosure, aiming to make the bulk of these assets valued at around $480 billion more liquid and tradable.

It forms part of ongoing steps to widen and modernise Jamaica’s capital markets.

The JSE will set up a new portal that allows the trading of these assets, also known as private placements, by brokers and accredited rich investors. But it’s also up to the discretion of the broker as to whether a client gains access. Accredited investors are typically required to have a net worth of around $50 million and income of $10 million.

“We have developed this portal for placing private debt and later equity issues,” said JSE Group Business Development Manager Andre Gooden, one of the presenters at a virtual forum hosted on Tuesday by the Jamaica Securities Dealers Association, JSDA, to address issues in the market.

The forum focused on building investor awareness, and introducing investors to the concept of high-quality liquid assets and corporate ratings in the Jamaican landscape.

For more than a decade, brokers have been able to arrange placements on behalf of corporate clients, for working capital and other purposes. Such placements done under exempt distribution guidelines developed by the regulator Financial Services Commission, are only open to subscription by rich or sophisticated investors and institutions, and as such issuers are not required to produce prospectuses.

Karen Blair, senior director securities at the FSC, said currently there are 242 local currency exempt distributions outstanding valued at $341 billion and an additional 73 in foreign currency valued at US$1 billion outstanding in the system.

The platform “will widen the availability of these securities to accredited investors”, said Gooden. “We are way down the line with this. We have had user training completed and broker sensitisation completed. We expect regulatory approval very soon, and by the middle of next week the platform will be ready, and we will be going live,” he told the forum.

The platform is not only expected to lead to greater liquidity, or ability to trade the assets more easily, for accredited investors, but will also allow for restricted financial entities and collective investments schemes to acquire such securities.

Currently, some regulatory requirements limit participation in illiquid securities, unless the assets are easily convertible to cash. The creation of a platform to trade private placements would provide that opportunity for conversion, thereby unlocking the value of the assets, said President of the JSDA, Steven Gooden.

“It will allow collective investment schemes to click that liquidity box,” said Gooden, who is also CEO of one of the top brokerages, NCB Capital Markets Limited.

Dr Jide Lewis, division chief in charge of the Financial Institutions Supervisory Division at the Bank of Jamaica, said banks and other regulatory entities are required to maintain 60 per cent of their holdings as high-quality liquid assets, which includes things like cash, and high-grade Government of Jamaica bills and bonds.

Lewis said a secondary market to trade private placements would help to strengthen the overall quality of the market, especially when bonds are rated by third party rating agencies, such as Barbados-based CariCRIS.

“It is going to stimulate lowering the cost of funding for Jamaican issuers of corporate debt securities who are going to have those issues rated, when they can demonstrate that those issues are liquid, and that those issues have the ability once they are traded or sold can be sold to near their current market value,” Lewis said.

CEO of CariCRIS Wayne Dass, who was also a presenter at the JSDA forum, told participants that over 20 entities have been rated in Jamaica and that it continues to develop a rating scale specific to this country.

“We are also setting up an office in Jamaica and the timeline for that is March 2021,” Dass announced.

steven.jackson@gleanerjm.com