Linda Hutchinson-Jafar, Business Writer

Wayne Iton, general manager of the Trinidad and Tobago Stock Exchange. - File

The Trinidad and Tobago Stock Exchange (TTSE) is to introduce trading in depositary receipts (DRs), but meanwhile the plan awaits legislation that will guide their regulation.

Charles De Silva, deputy general manager of the Trinidad and Tobago Securities and Exchange Commission (TTSEC), said his agency had already made recommendations to the finance ministry on the regulatory framework required, which in turn will guide legislative action.

"That's the status right now," De Silva told Wednesday Business.

In addition to the by-laws, other changes have been proposed to the income tax act and national insurance laws to recognise DRs as domestic securities.

Wayne Iton, TTSE general manager and chief executive officer said the laws would have to be amended to create the platform for the trading of the securities.

"We are doing what we have to do by making sure we have that platform," he added.

Tradable security

A depositary receipt is a tradable security, usually in the form of equities that are listed on an exchange, issued by a foreign company which allows for ownership in that company beyond its home borders.

Interest in DRs was triggered by the US$2.2 billion acquisition of RBTT by Canadian-based RBC.

RBC, under that arrangement, agreed to issue depositary receipts in the market where the merged banking operations would be headquartered, Port-of-Spain, once the primary transaction was complete. The deal was sealed at the end of June, but the merger of the Caribbean operations of RBC with that of RBTT, under the umbrella of RBC Caribbean, is expected to last three years.

Nicole Duke-Westfield, external affairs manager of RBTT also confirmed that both financial houses have been working with Trinidad's securities commission and stock exchange on the establishment of a market for DRs.

"In terms of its timeline or its inauguration, that's a matter for the SEC," she added.

De Silva also sees DRs as a mechanism for domestic investors to enter the foreign market.

"We think the conditions are certainly propitious for investors. This will allow for greater scope of investing in the DRs, increase the level of investment and increase the level of diversification," he said.

TTSEC's chairman and CEO Osborne Nurse during a recent address to business leaders said the commission was strongly of the view that sufficient market interest exists or will emerge for depositary receipts issued in Trinidad that are based on the shares of important energy companies operating in the country such as BP, BHP Billiton and Mittal.

"The issue of depositary receipts in such companies would allow the average Trinidad and Tobago investor, many of whom do not have the capacity or resources to access these shares in metropolitan markets, an opportunity that we think will be most welcome to participate and share in some way in the fortunes of these companies and of Trinidad and Tobago."

Nurse said although the SEC had contemplated recommending the introduction of depositary receipts as a mechanism through which Mittal could discharge its obligation to issue shares to its employees, it was the RBC/RBTT transaction that provided the opportunity for the Commission to propose the legal framework.

"In our view, the RBC/RBTT transaction could not be allowed to result in the substantial reduction of securities and of value available on the stock exchange and we therefore strongly encouraged RBC to replace that value on the exchange."

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