Dennise Williams, Staff Reporter
MEMBERS OF the Jamaica Stock Exchange (JSE) have unanimously voted to demutualise. In an extraordinary general meeting on January 26, the members, who are also owners of the stock exchange, decided to convert to a for-profit public company. The membership will then be converted into shares.
In its 36 years of operation, the JSE was a mutual company that was operated in a non-profit manner. Stockbrokers had to be part owners in order to trade on the stock exchange. Now that will change in the near future.
Making the announcement yesterday, Roy Johnson, chairman of the JSE explained, "This means that within six months, the JSE will decouple the function of being a member/owner and being a trader of stocks."
In essence, this means that a qualified stockbroker, even ones outside of Jamaica, can pay a fee to the JSE and have trading access.
According to Mr. Johnson, the rationale for demutualisation is as follows:
Following the trend of other exchanges, the JSE can put more emphasis on encouraging companies to list on the exchange rather than leaving that to stockbrokers.
The need to position the exchange regionally to attract more market participants and increase liquidity.
It is undesirable, in the long term, for control of an entity to reside with only one group of its customers. The new focus will be of a company with the objective of maximising the value of the equity shares by servicing the demands of customers in a competitive manner.
The need to unlock the value of the members' investments in the company.
The last point is interesting because it speaks to the future possibility of the stock exchange becoming a listed company itself.
To this, Mr. Johnson states, "If you are really going to unlock the value of the JSE, then you would go in that direction. Really, it is the end step of the demutualisation process. However, I will not make a commitment to a time frame for that."
Mr. Johnson explained that the immediate focus of the demutualised JSE would be to offer additional services such as getting a regional exchange going and offering educational courses. He explains, "The greater offering of services means that we won't be so dependent on cess income."
But the bottom line value of the stock exchange is the companies that make it up. Acknowledging this, Mr. Johnson states, "To survive in the long run, we have to be more aggressive in getting new listings."
