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Caribbean Management Talk

Looking For Growth in Trinidad

Author: Staff
Last Update: Nov 18, 2:16 PM ET

Click here to view the detailed PDF version

Wain Iton
One of the significant markets in the Caribbean region, the Trinidad and Tobago Stock Exchange, still has a lot of room to grow. Dealing with illiquidity and a limited offering, the manager Wain Iton primarily focuses on attracting new listings and new types of securities traded.
Trinidad & Tobago Stock Exchange
Q: What have been the major developments of the Trinidad & Tobago Stock Exchange? Could you give us some background information?

The exchange was established in 1981 and has continuously evolved since then. It started with about 30 listed companies, and we have had some good years and some bad years. The listed companies are spread across a number of industries, including finance, manufacturing, trading, and conglomerates. The financial sector is the dominant sector.

In 1995, the Securities Industry Act came into existence and established the Securities and Exchange Commission which oversees the industry, the SEC. There are six brokers in the marketplace. Most of them are aligned to a large financial institution, but there are also two independent brokers.

The important matter is that the exchange has to continue to grow in the future; our goal is to become a much bigger exchange. We trade primarily equities, but we also have a debt market and a mutual fund market. We donít have any derivatives, but we are looking at that opportunity. Currently, it is difficult to develop a derivative market because we are still illiquid and with limited offerings.

Q: Liquidity is a big issue in the Caribbean region. What is your strategy for educating the public about the opportunities and for attracting investors?

Yes, there is a big public education task at hand which we have to deal with. I managed the Jamaica market for a number of years, and in Jamaica, we had a very comprehensive public education program. Weíre trying to do something similar in Trinidad and Tobago, but weíre still on the ground floor. We have a threeyear plan that would roll us into 2011 but, for the time being, the market is peripheral. We have to take the market to the people via a number of different routes.

Q: What is the population of Trinidad and Tobago? How many people have active investment accounts?

The population of Trinidad and Tobago is about 1.3 million, and less than 5% of the people are direct participants in the market. However, a fair number of people have indirect participation through the Trinidad and Tobago Unit Trust Corperation, our version of a mutual fund. Since establishment, it has had tremendous success in terms of attracting accounts. Through a number of fiscal incentives, the fund garnered more than 400,000 accounts. They managed to attract almost every household through fiscal incentives. In the last years, however, I donít think that they have attracted many new accounts, because the market has been volatile and the returns have been somewhat flat.

Q: What is the size of the market in terms of capitalization? Also, how many of the 30 stocks trade every day?

The market capitalization has grown significantly. The total capitalization today, including the cross-listed stocks, is about US$16 billion. The local market is about US$10 to US$11 billion, and the crosslistings account for US$4 to US$5 billion. About 16 to 17 stocks trade regularly.

Q: What is the technological platform of the exchange?

We use the same technology as other exchanges in the region. Barbados, and Jamaica are on the same hardware/software platform. Every now and again thereís a different software version, but we basically run the trading and settlement systems from NASDAQ OMX.

Q: Whatís the average trading volume? How many trades do you process per day or per year?

Year-to-date we have done about 19,000 trades, while last yearís average was about 16,000 trades. August has been a particularly slow month, but May, June, and July were pretty robust.

From my perspective, the big issue is that we have to grow this entity. That means getting new listings, both in terms of new equities and new products. We will also focus on some debt initiatives to see if we can get more depth in that market.

Q: What is the nature of the debt market? Who are the main issuers, the government or the corporations?

Government debt is traded on our market, but itís not very robust. The government issues only long-term bonds. It doesnít really need to borrow from the public and, whatever borrowing they do, is primarily to mop up the excess liquidity.

We do have some activity on the corporate debt market and we are watching it carefully. There are probably a couple of dozen corporations that issue debt and the big banks are always in the market.

Q: How large is the potential for new listings? Are there many private corporations with more than $10 million in sales?

Yes, there are a number of them, and the statistics are quite encouraging. There are 367 businesses that employ more than 100 people, which constitutes a critical mass. Thatís the pool that we have to be able to tap into.

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