caribbean exchanges network (cxn) framework and infrastructure presented by: marlon yarde march 24,...
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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
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 investmentTo 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 DepositoriesRegistration documents for the Securities
CommissionRules 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 Trinidad
Securities Company/Member Dealer
BDS$10,000.00
JA$5,000.00 – Initial with submission of application
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.
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 Barbados Jamaica Trinidad
Pre-open 9:00 am 9:00 am 8:00 am Open 10:00 am 9:30 am 9:30 am Pre-Close 12:00 noon – 2:00
pm Close 1:00 pm 1:00 pm 2:00 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
High Speed Link
Trade Execution
Investors visits broker and instructs
the broker to purchase shares on
T&T Exchange
Jamaica Barbados
Trinidad &
Tobago
TWS and CSD Windows
Exchange and Depository
Jamaica
Exchange and Depository
Barbados
Exchange and Depository
Trinidad & Tobago
Traders will have access to systems in all regions from one workstation
2. Trader can view client holdings in TTCD and print various reports
1. Traders using the CXN network will create an account for the client in the TTCD. Trader can then enter a order using the A/C created
Order Flow from Broker in JA to T&T System
Confirmation message sent to trader and client account updated in TTCD
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:
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.
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
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.
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 Exchange’s network. Members will
not be required to make individual connections to each Exchange/Depository
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 ForwardPhase 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
CXN BrokersOrder Entry
InternetPort
AutomatedTrading
MarketData Feeds
CH/Depository
BrowseTerminal
Foreign-based non-resident or other
International Trader
Internet
CXN
OrderRouting
Affirmations
Thank You
Contact Information
Marlon Yarde – CEO/General Manager
T. (246) 436-9871
F. (246) 429-8942
W. www.bse.com.bb