By Dennise Williams, Staff Reporter"THE JSE cannot continue to carry out its regulatory role with its present cost structure. The JSE paid the Financial Services Commission (FSC) $20 million in fees for 2003 while it paid its entire staff $27 million for salaries in 2003."
Roy Johnson, executive chairman of the JSE made these comments speaking at the JSE's annual general meeting on June 24 at its Harbour Street headquarters. The JSE not only facilitates the buying and selling of equities on the local stock market, it regulates broker/members and listed companies. Some of the very same listed companies and broker/members are also regulated by the FSC, which in turn also regulates the JSE.
Explains Mr. Johnson, "The stock exchange is responsible for the regulation of its broker/members listed companies through its rules. We take that responsibility seriously. We encourage broker/members and listed companies to give due attention to our rules, as a well regulated market will engender confidence and attract more investors. On the other hand, regulatory costs paid by the JSE are high." The Exchange revealed that each year the fees paid to the FSC go up, however, it is the difference between 2002 and 2003 that is most significant.
Mr. Johnson continues, "Only in 2003 did the Exchange make a profit before investment income and taxation. Of each dollar that the JSE collects in revenue on transaction, the FSC charges a 25 per cent cess. When our revenues go up, then the absolute costs of the FSC go up."
And it's not just the FSC that takes a bite out of the Exchange. Mr. Johnson reveals, "We have to note, however, that the JSE paid $39 million in taxes to the Government. I do not believe there is any other organisation that pays out such a high percentage of revenue to the Government."
The JSE's operating revenue was $92.2 million for 2003 a 186 per cent increase over $59.9 million earned in 2002. Their surplus on operational profits before tax was $62 million compared to $14 million in 2002.
But will the JSE buckle under the imposed fee structure? Mr. Johnson smiled and dismissed that possibility but did add, "We will continue to have discussion with the FSC. They are aware of our concerns. They recognise that we are a self-regulating organization. I believe that we have a listening ear at the FSC."
When questioned by Financial Gleaner regarding the JSE's point of view on fees, FSC Public education and research assistant Bridget Rhoden invited us to review the regulator's fee policy on the FSC's website.
Nevertheless, the JSE has laid the foundation to move forward. Mr. Johnson states, "As you may be aware, we have signed a Memorandum of Understanding with Trinidad for the integration of our stock markets. We have also received a serious expression of interest from Barbados to join with us. I am confident that we will have fruitful discussions."
Looking back at 2003, JSE general manager, Marlene Street was pleased with the performance of the exchange. "The year 2003 was remarkable. The Index performed positively. It moved from 45,346.21 points at the end of 2002 to 67,586.72 points at the end of the year under review. Market capitalisation almost doubled. It moved from $292 billion to a 75 per cent increase of $512 billion over that twelve-month period. Transaction volumes increased by 33 per cent from 26,999 in 2002 to 35,954 in 2003." Looking forward, Ms. Street revealed increased use of technology would be the platform to move the exchange forward. "We are looking forward to a year of tremendous possibilities. With God's guidance we move towards our goal of growth and development."
