A modern corporate structure and good governance system are essential features of any stock exchange that expects to attract new listings, develop new products, be competitive or attract its own capital.

These were some of the thoughts that dominated the proceedings at a retreat in April 2003 when the council of the Jamaica Stock Exchange (JSE), led by its then nine broker-members, decided to embark on the process of demutualisation of the exchange.

The process has been somewhat longer than we had anticipated but we are now down to the final two steps that need to be taken, namely monetising the value of the shares of the current eleven broker-members, and signing their trading agreements with the stock exchange.

The JSE has already revised its memorandum and articles of association to facilitate demutualisation and conversion to a for-profit limited-liability company.

The JSE Council has become the JSE Board of Directors and each of the 11 shareholders has been issued an additional 50,000 ordinary shares, bringing their current holdings to 550,000 units each.

An authorised share capital of 700,000,000 units was established and it is planned that additional issued share capital required will be raised through an initialpublic offering (IPO).

The JSE would, thereafter, become listed on its own exchange, a far from unique situation since several exchanges around the world already have this characteristic.

The JSE IPO and listing are now expected to take place by mid-2008, in fulfilment of a promise to “practise what we preach” by giving the public an opportunity to invest in the stock exchange.

WHAT WILL BE DIFFERENT

It is expected that the JSE’s operational efficiency, as driven by our focus on effectively adopting the appropriate technology, our profitability and prospective new products, including the pending Caribbean Stock Exchange Network, will prove attractive to investors by offering them real value and solid returns in the coming years.

The JSE has already started to show signs of how it will operate as a for-profit company, having initiated an islandwide outreach programme of informational seminars at strategic locations around the island.

This is a precursor to an aggressive marketing programme on the business of investing in equities or on any other asset classes that are traded over the exchange.

In the past, the JSE has relied on the broker-members to do this and while they will undoubtedly choose to continue their own advertising and promotional activities, the exchange will become more prominent in the mix.

After demutualisation and listing, the JSE will have a much larger base of ownership, creating additional interest in the stock market generally, even while contributing directly to increased market capitalisation.

In addition to already adhering to the requirements of the Companies Act and Securities Act and to adopted guidelines for corporate governance, the JSE will now have to comply with its own rules for listed companies, publicly reporting within stated deadlines and disclosing significant events.

We expect to continue our self-regulatory function through the creation of a new department called the Market Regulations Department (MRD).

SELF-REGULATION

This would be headed by a chief regulatory officer who would report directly to a regulatory oversight committee of the board consisting entirely of independent directors. The decisions of the committee would be final.

The MRD would be responsible for three areas of market control:

■ Market surveillance