Demerara Waves Online News- Guyana Riding on the Crest of Truth
Last Updated on Wednesday, 31 January 2024, 17:53 by Denis Chabrol
The Guyana Stock Exchange’s (GSE) efforts to modernise its operations has hit several stumbling blocks for almost 20 years now, and this has been compounded by the fact that none of the public companies is listed on tier one of that secondary market, the GSE Chairman Nikhil Ramkarran said Wednesday.
While expressing concern that he was not contacted before to react to concerns by Chairman of Banks DIH Limited, Clifford Reis, Mr Ramkarran said there was no local public company listed on the GSE. “There is no local company in Guyana that is officially listed on the stock exchange and that includes Banks DIH. All they are, is traded on the stock exchange,” he told Demerara Waves Online News.
When the GSE was established it provided for tier one listing of companies that want to trade their shares publicly, and tier two trading without the GSE, Guyana Securities Council (GSC), other charges or other requirements. Every public company must have 50 or more shareholders and must be registered with the GSC after which it could apply to trade on the GSE. He said any company that is listed to trade on the GSE goes through no special process for that service, pays no fees and there is very little or no regulation for those companies.
According to Mr Ramkarran, the GSE has tried for more than 10 years to get the big companies to list but “they do not wish to list because there are costs associated with listing, there are requirements associated with listing and there is increased scrutiny.” He could not immediately say what are the initial one-time and annual costs associated with listing on the stock exchange, but said he believed it was linked to the number of shares. He said the GSE offered to make listing financially attractive but there was no uptake. “We offered several companies, including Banks DIH, to completely waive the initial cost and to give them a discount on the annual cost. They did not avail themselves of that opportunity. They have absolutely no call to criticise anything that they with us because they have not made or taken any of the numerous opportunities they have been offered,” he said.
Mr Reis last weekend recommended that an odd-lot market be put in place to avoid the trading in less than 1,000 shares affecting the overall share price of companies, but Mr Ramkarran said the GSE would refuse to do so until publicly trading companies enlist with the GSE and pay the necessary fees. “That system is not going to be offered to people who are on the second tier and paying us no money. Banks DIH earns significant value from having their shares publicly known to be a specific value. If they want to have that value controllable in the manner that they wish, then they need to start paying for the service they have been accessing for free for decades,” he said. Mr Ramkarran promised that if Banks DIH lists officially on the stock exchange, he would “ensure the day after that his shares are not subject to fluctuations on quantity of shares sold and the value.” He explained that the system would be a “cut out” to avoid the share price from being affected by low volume trading or share value assessment based on the number and price to minimise the impact. “There are odd-lot systems. There are a number of different systems that can be implemented but we have no reason to implement that now because there is no benefit to us… They don’t pay us anything at the moment,” he said.
He said not that it could not be done free of cost but “it will not be done free of cost” because those companies on tier two were already benefitting from the GSE and were now asking that those benefits be further refined. “They are asking for an additional service to be provided to them and want to have that service provided free of cost. It would not be provided free of cost,” he said.
He said the odd-lot has not been introduced because the GSE is unable to introduce the necessary rules because there has been no clearance.
The GSE Chairman acknowledged that the Banks DIH Limited Chairman’s concern about trading were valid, and said dating back to 2005 he had asked successive Ministers of Finance and other officials under the People’s Progressive Party Civic and A Partnership for National Unity+Alliance For Change (APNU+AFC) administration to address a number of concerns. “This is continuously for 20 years, meeting with these people, sending papers with respect to what is necessary and what should be done,” he said, adding that the GSE’s Chief Executive Officer had also met with Mr Reis.
Mr Ramkarran said it was only last year that a commercial company convinced the government within one or two months that the school’s curriculum should include financial market education after the GSE had tried previously through the Minister of Education and the Minister of Finance.
The GSE Chairman said the local stock exchange was badly underfunded, only getting a low double digit subsidy from the government. He said things were so bad that it was still selling shares on a decades-old computer system. “We cannot get the things that we want. Our computer system is 20 years old. It’s the same system that was initially used that is our trading system; numerous requests to just get a little money to just get a trading system,” he said. He said the GSE was denied funding to acquire trading software: “Nothing in the budget!” Most of the GY$10 million to GY$15 million government subsidy, he said, is for rental of the building, electricity and other expenses.
The GSE, he said, could not even afford a modern real-time electronic trading system that is being used in Developed Nations and several other Caribbean stock exchanges.
Among the things that need to be fixed, he said, was the need for the cost to be changed so that it is skewed in favour of the stock exchange. He noted that the cost of doing a trade on the stock exchange works out to the same as if it was done privately. “We have completed proposals that we have put to the various Ministers of Finance. There are issues with the Securities Council and the reporting issuers. That is not my business but there are long-standing issues,” he said. Mr Ramkarran said he was confident in saying that stockbrokers “make absolutely no money on the stock exchange and haven’t for 20 years.”
Even if the GSE acquires a high-tech real-time trading system, Mr Ramkarran said the legislation would have to be updated. Currently share trading is done via a largely paper-based system whose transactions take as much as two weeks week to finalise the transfer. “No stock exchange can operate without an electronic repository…With an electronic repository, trades are instantaneous. This is what is done in every modern country around the world and several in the Caribbean. He said other stock exchanges have offered to sell the GSE an electronic repository worth hundreds of thousands of US dollars. “They have been trying to sell us what they use, but we have no money to purchase it. We have no finances with which to make those purchases. We have asked for it. It has been refused,” he said. He added that the GSE could not even afford an electronic noticeboard to publicly display trading, although the exchange favoured transparency and information.
According to the GSE Chairman, before an electronic repository is put in place, the legislation would have to be changed. He said he has heard of legislative reform but neither the government nor the regulator, the Guyana Securities Council, has contacted the exchange. “We have asked for copies of this draft legislation. That has not been provided. We have absolutely no input or information from anybody that will tell us what stage this is at. We don’t even know what changes are being made,” he said. He said the GSE had provided unsolicited information to the government dating back as late as “some time after 2020.”
Reacting to a report that the Georgetown Chamber of Commerce and Industry (GGCI) was spearheading efforts to set up a second stock exchange with assistance from the Jamaica Stock Exchange (JSE), Mr Ramkarran queried whether it would still be the existing legal architecture that would be used to govern it. “That’s fine. They can go ahead. That’s not a problem. Who are going to be their brokers because brokers have to be licensed by the Securities Council,” he said.
The GSE Chairman noted that the Securities Council has not given the green-light to the existing secondary market to charge certain fees.