Caribbean Exchanges Network (CXN) Framework and Infrastructure Presented By: Marlon Yarde March 24, 2011

OVERVIEW OF CXN

WHAT IS THE CXN?

• The Caribbean Exchange Network (CXN) is a solution to allow investors, traders and brokers of all regional countries to have direct access to all financial products that are listed on regional securities exchanges

OBJECTIVES OF THE CXN

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Objectives:

 To provide an additional channel for encouraging and mobilizing domestic and regional savings  To project a larger footprint for the interest of international investors  To foster the growth of the domestic financial services sector  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 CXN

       Currently made up of 3 Member Countries Barbados, Jamaica, and Trinidad & Tobago – Exchanges and Depositories utilize current trading and settlement platforms represents phase 1 of the CXN Connection to each Exchange is via high speed link Local markets continue to exist in present form Facilitate trading in other jurisdictions CXN Member Dealers restricted to carrying out business for investors in their territory only Open to other Regional countries

CXN Network

CXN DOCUMENTS REQUIRED FOR PHASE I

Exchanges and Depositories:

 Memorandum of Understanding (MOU)

CXN Member Dealers:

 Registration documents for the Exchanges and Depositories  Registration documents for the Securities Commission  Rules governing local jurisdictions

THE PROCESS

 To trade in other jurisdictions, Brokers must register there  CXN Brokers must apply for registration with the Securities Commission and Exchanges and Depositories. There is no charge for registration in the first year. For expediency, all forms completed must be submitted to the local Exchange for forwarding to the Securities Commission and CXN Exchanges.

 Brokers and traders must be recommended by their local Exchange before approval in other territories  Brokers are bound by rules governing local jurisdiction  Funds Settlement: CXN Brokers must determine the bank within the CXN jurisdiction in which they will open an account to facilitate settlement of CXN transactions via RTGS.

This should be communicated to the respective Depositories

SECURITIES COMMISSION REGISTRATION FEES

Barbados Jamaica Securities Company/Member Dealer

JA$5,000.00 – Initial with submission of application BDS$10,000.00

JA$500,000.00 to be paid after approval. This is based on the Company’s assets and is paid annually. $500,000.00 is the minimum cost.

Trinidad

TT$5,000.00

Trader/Approved Representative/Investment Adviser/Responsible Officer

BDS$2,500.00

JA$5,000.00 – Initial with submission of application JA$16,000.00 to be paid after approval. This fee is paid annually.

TT$5,000.00

OPERATIONAL PROCEDURE: TRADING AND SECURITIES SETTLEMENT

WHEN DOES TRADING TAKE PLACE ON CXN?

 Trading on the CXN Exchanges will take place Monday to Friday as outlined below – – Session Pre-open Open Pre-Close Close Barbados 9:00 am 10:00 am Jamaica Trinidad 9:00 am 1:00 pm 8:00 am 9:30 am 12:00 noon 9:30 am – 2:00 pm 2:00 pm 1:00 pm Pre-Close – TT verify trading and settlement reports and enter put through transactions Local times are observed.

WILL TRADERS HAVE ACCESS TO ALL SHARES ON EVERY MEMBER EXCHANGE?

 Yes  Brokers first connect to their respective Exchanges to gain access to the other Depositories and Exchanges  Thereby have access to 3 Trading Workstations and 3 Clearance and Settlement Systems (one for each of the current CXN jurisdictions)  Ability to enter orders and create accounts seamlessly in other jurisdictions  Monitor 3 markets for best execution of cross listed stocks

HOW WILL A MEMBER EXECUTE A TRADE?

Example: A Barbadian Investor wishes to purchase shares that are listed on the Jamaica Market.

 Investor contacts his Barbadian Broker, who is a CXN member  Broker brings up JSE Trading Workstation on his computer and quotes current ask price to the Client  Broker advises Client of requirements for account set-up and relevant CSD and Brokerage fees.

 Broker gets approval and creates an account for Client with JCSD, following JCSD procedures

HOW WILL A MEMBER EXECUTE A TRADE?

PART 2

 An order is entered on the Jamaica Market, if matched the trade occurs  Client is advised of price at which the shares are settled  Broker can print ticket summary from trading system and Buy/Sell Reports from clearing and settlement system.

 The local broker charges the client agreed fees  Trade attracts the JSE charge (because that is where the trade occurred)  Client pays Barbadian Broker, who pays JCSD (using regular settlement accounts)

WHO HAS JURISDICTION OVER A TRADE?

 The domiciled Exchange on which the trade is executed has jurisdiction. (JSE in the example)  The Buy/Sell Transaction would be recorded in that same Market (JSE)

Visual Overview of Trade Execution

INVENTORY POSITIONS

In respect to client holdings:  It will be necessary for Clients to open an account in the Depository within the jurisdiction in which they wish to trade  All positions will be held in the Depository of the country where the security is traded  Clients will get a statement from the CSD which holds the inventory

DISSEMINATION OF MARKET INFORMATION

How information is disseminated will be practiced by all three Exchanges as outlined below:

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Trade Summary

– At the close of market, trade sheets and summary sheets are prepared and emailed to brokers, media, internally and other investors. Trade summaries and summary sheets are distributed daily, weekly, monthly and yearly. Trade and summary sheets are also available on the websites of the respective CXN Exchanges.

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Listed Company Financials

– Once submitted by the company and approved by the General Manager, are logged and distributed to brokers.

DISSEMINATION OF MARKET INFORMATION – PART 2

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Listed Company News

– Once submitted by the company and reviewed and approved by the General Manager, are logged and distributed internally and to brokers by fax.

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Broker Transaction files

– Each broker’s trading activity files are emailed to the respective brokers daily in dbf, csv, xml , xls and doc formats 

Website

– Company news and Financials are posted to the website in PDF format. The financials are loaded on the website by the listed companies and then approved and posted to the website.

THE NETWORK

 Access will be provided via each not be required to make Exchange/Depository Exchange’s network. Members will individual connections to each  Contingency: Appropriate backup systems will be implemented to mitigate against total failure of one exchange or the entire CXN  Telecommunication access – Should the TTSE network become inaccessible and there is still a connection to the other regions through the TTSE, the CXN will continue to operate (Example)  Application Access: Each jurisdiction will continue to control its own market. Access will be granted based on the role of the individual in the respective brokerage house, registrar and institutional investor.

 System Administration & Maintenance  Day to Day administration will be de-centralized  Each system interface will be monitored by the technical team in the respective regions

What is the real impact for Brokers?

 Access to 100+ stocks in 3 markets  Larger pool of investors  If Trinidadian clients want to purchase stocks which are traded on Jamaican and/or Barbados Exchanges, then  Brokers will have to open account with CSD in these countries  Have with bank in local jurisdiction to facilitate settlement of CXN transactions via RTGS   Monitor 3 markets for best execution of cross listed stocks Explain applicable fees and conditions to clients

Looking Forward

Phase 2:  Connectivity for other Regional Exchanges  Integrated Platforms – One order book  Workstations populated using consolidated data feeds  Order routing through Fixed Gateway automated order routing

Browse Terminal Foreign-based non resident or other International Trader Market Data Feeds Order Routing Affirmations Internet Port Internet CXN Automated Trading CH/Depositor y CXN Brokers Order Entry

Thank You

Contact Information

Marlon Yarde – CEO/General Manager E. [email protected]

T. (246) 436-9871 F. (246) 429-8942 W. www.bse.com.bb