Caribbean Exchanges Network (CXN)Framework and Infrastructure

Presented By: Marlon Yarde

March 24, 2011

OVERVIEW OF CXN

WHAT IS THE CXN?

• The Caribbean Exchange Network (CXN) is a solution to allow investors, traders and brokers of all regional countries to have direct access to all financial products that are listed on regional securities exchanges

OBJECTIVES OF THE CXN

Objectives:

To provide an additional channel for encouraging and mobilizing domestic and regional savings

To project a larger footprint for the interest of international investors

To foster the growth of the domestic financial services sector

To increase the overall efficiency of investmentTo help reduce corporate dependence on borrowing and

improve the gearing of the Regional corporate sector

Structure of the CXN Currently made up of 3 Member Countries –

Barbados, Jamaica, and Trinidad & Tobago Exchanges and Depositories utilize current

trading and settlement platforms - represents phase 1 of the CXN

Connection to each Exchange is via high speed link

Local markets continue to exist in present form

Facilitate trading in other jurisdictions CXN Member Dealers restricted to carrying

out business for investors in their territory only

Open to other Regional countries

CXN Network

CXN DOCUMENTS REQUIRED FOR PHASE I

Exchanges and Depositories:Memorandum of Understanding (MOU)

CXN Member Dealers:Registration documents for the Exchanges

and DepositoriesRegistration documents for the Securities

CommissionRules governing local jurisdictions

THE PROCESS To trade in other jurisdictions, Brokers must register there

CXN Brokers must apply for registration with the Securities Commission and Exchanges and Depositories. There is no charge for registration in the first year. For expediency, all forms completed must be submitted to the local Exchange for forwarding to the Securities Commission and CXN Exchanges.

Brokers and traders must be recommended by their local Exchange before approval in other territories

Brokers are bound by rules governing local jurisdiction

Funds Settlement: CXN Brokers must determine the bank within the CXN jurisdiction in which they will open an account to facilitate settlement of CXN transactions via RTGS. This should be communicated to the respective Depositories

SECURITIES COMMISSION REGISTRATION FEES

Barbados Jamaica Trinidad

Securities Company/Member Dealer

BDS$10,000.00

JA$5,000.00 – Initial with submission of application

JA$500,000.00 to be paid after approval. This is based on the Company’s assets and is paid annually. $500,000.00 is the minimum cost.

TT$5,000.00

Trader/Approved Representative/Investment Adviser/Responsible Officer

BDS$2,500.00

JA$5,000.00 – Initial with submission of application

JA$16,000.00 to be paid after approval. This fee is paid annually.

TT$5,000.00

OPERATIONAL PROCEDURE: TRADING AND SECURITIES

SETTLEMENT

WHEN DOES TRADING TAKE PLACE ON CXN?

Trading on the CXN Exchanges will take place Monday to Friday as outlined below

Session                Barbados        Jamaica              Trinidad

        Pre-open            9:00 am         9:00 am                8:00 am        Open                 10:00 am          9:30 am              9:30 am Pre-Close 12:00 noon – 2:00

pm Close                      1:00 pm          1:00 pm           2:00 pm

– Pre-Close – TT verify trading and settlement reports and enter put through transactions

– Local times are observed.

WILL TRADERS HAVE ACCESS TO ALL SHARES ON EVERY MEMBER

EXCHANGE? Yes

Brokers first connect to their respective Exchanges to gain access to the other Depositories and Exchanges

Thereby have access to 3 Trading Workstations and 3 Clearance and Settlement Systems (one for each of the current CXN jurisdictions)

Ability to enter orders and create accounts seamlessly in other jurisdictions

Monitor 3 markets for best execution of cross listed stocks

HOW WILL A MEMBER EXECUTE A TRADE?

Example:A Barbadian Investor wishes to purchase shares that are

listed on the Jamaica Market.

Investor contacts his Barbadian Broker, who is a CXN member

Broker brings up JSE Trading Workstation on his computer and quotes current ask price to the Client

Broker advises Client of requirements for account set-up and relevant CSD and Brokerage fees.

Broker gets approval and creates an account for Client with JCSD, following JCSD procedures

HOW WILL A MEMBER EXECUTE A TRADE? PART 2

An order is entered on the Jamaica Market, if matched the trade occurs

Client is advised of price at which the shares are settled Broker can print ticket summary from trading system and

Buy/Sell Reports from clearing and settlement system. The local broker charges the client agreed fees Trade attracts the JSE charge (because that is where the

trade occurred) Client pays Barbadian Broker, who pays JCSD (using

regular settlement accounts)

WHO HAS JURISDICTION OVER A TRADE?

The domiciled Exchange on which the trade is executed has jurisdiction. (JSE in the example)

The Buy/Sell Transaction would be recorded in that same Market (JSE)

Visual Overview of Trade Execution

High Speed Link

Trade Execution

Investors visits broker and instructs

the broker to purchase shares on

T&T Exchange

Jamaica Barbados

Trinidad &

Tobago

TWS and CSD Windows

Exchange and Depository

Jamaica

Exchange and Depository

Barbados

Exchange and Depository

Trinidad & Tobago

Traders will have access to systems in all regions from one workstation

2. Trader can view client holdings in TTCD and print various reports

1. Traders using the CXN network will create an account for the client in the TTCD. Trader can then enter a order using the A/C created

Order Flow from Broker in JA to T&T System

Confirmation message sent to trader and client account updated in TTCD

INVENTORY POSITIONS

In respect to client holdings: It will be necessary for Clients to open an account

in the Depository within the jurisdiction in which they wish to trade

All positions will be held in the Depository of the country where the security is traded

Clients will get a statement from the CSD which holds the inventory

DISSEMINATION OF MARKET INFORMATION

How information is disseminated will be practiced by all three Exchanges as outlined below:

Trade Summary – At the close of market, trade sheets and summary sheets are prepared and emailed to brokers, media, internally and other investors. Trade summaries and summary sheets are distributed daily, weekly, monthly and yearly. Trade and summary sheets are also available on the websites of the respective CXN Exchanges.

Listed Company Financials – Once submitted by the company and approved by the General Manager, are logged and distributed to brokers.

DISSEMINATION OF MARKET INFORMATION – PART 2

Listed Company News – Once submitted by the company and reviewed and approved by the General Manager, are logged and distributed internally and to brokers by fax.

Broker Transaction files – Each broker’s trading activity files are emailed to the respective brokers daily in dbf, csv, xml , xls and doc formats

Website – Company news and Financials are posted to the website in PDF format. The financials are loaded on the website by the listed companies and then approved and posted to the website.

THE NETWORK Access will be provided via each Exchange’s network. Members will

not be required to make individual connections to each Exchange/Depository

Contingency: Appropriate backup systems will be implemented to mitigate against total failure of one exchange or the entire CXN

Telecommunication access– Should the TTSE network become inaccessible and there is still a connection to the other regions through the TTSE, the CXN will continue to operate (Example)

Application Access: Each jurisdiction will continue to control its own market. Access will be granted based on the role of the individual in the respective brokerage house, registrar and institutional investor.

System Administration & Maintenance Day to Day administration will be de-centralized Each system interface will be monitored by the technical team in the

respective regions

What is the real impact for Brokers?

Access to 100+ stocks in 3 markets Larger pool of investors If Trinidadian clients want to purchase stocks which are

traded on Jamaican and/or Barbados Exchanges, then Brokers will have to open account with CSD in these

countries Have with bank in local jurisdiction to facilitate settlement of

CXN transactions via RTGS Monitor 3 markets for best execution of cross listed stocks Explain applicable fees and conditions to clients

Looking ForwardPhase 2:

Connectivity for other Regional Exchanges

Integrated Platforms – One order book

Workstations populated using consolidated data feeds

Order routing through Fixed Gateway - automated order routing

CXN BrokersOrder Entry

InternetPort

AutomatedTrading

MarketData Feeds

CH/Depository

BrowseTerminal

Foreign-based non-resident or other

International Trader

Internet

CXN

OrderRouting

Affirmations

Thank You

Contact Information

Marlon Yarde – CEO/General Manager

E. marlon.yarde@bse.com.bb

T. (246) 436-9871

F. (246) 429-8942

W. www.bse.com.bb