Bermuda Stock Exchange May Move To Day Trading

Mairi Mallon, Royal Gazette

05 February 2001

This story is reproduced by kind permission of the Royal Gazette at http://www.accessbda.bm

Bermudians could be able to trade online on the Bermuda Stock Exchange within the next two years, according to William Woods, BSX's chief executive officer.

And the managers of the exchange hope that by having day traders, the BSX will become more liquid.

A new computer system called GlobalScrib, an automated clearing and settlement system, will be installed this year and will be the first step to trading on-line. Mr. Woods says the system will reduce costs and increase efficiency in the BSX as well as allowing trades to take place quickly.

"The present system is a paper-based system that is old- fashioned. What we are doing is moving with the times," said Mr. Woods. The BSX declined to give a date when an on-line trading facility would be up and running, stating it was too early to say. However, they said they hoped to have it within two years.

And the new facility, using the GlobalScrib, will provide, for the first time, a guarantee that the trade will be honoured.

At present trading is a difficult and cumbersome process which can take days to effect and up to a week more to offload the shares once again.

The physical certificate which has traditionally been issued to shareholders with shares in the BSX, has had to be transferred from owner to broker to purchaser. This trade is made even more complicated if one person owns 1,000 shares, but only wants to sell 100 of these.

New ownership documents, which have a red seal and are written in italic script, will have to be issued to both parties, and each document could take up to seven days to be produced.

Before the owners of these documents, which have to be kept safe in the likes of a bank or safety deposit box, can sell on the shares they bought they will have to have a physical copy of the certificate, a delay which could potentially cost investors who want to buy and sell quickly in order to maximise investments.

Now, with the new system, there will be no physical certificates, but GlobalScrib will hold the deeds' titles within its computers.

"It will record ownership in the same way money is transferred in a bank without actual cash changing hands, so will shares be transferred and recorded," said Mr. Woods. This will make the business of trading BSX local shares easier and will allow more speculative trading on the exchange. GlobalScrib, which will hold the shares in a kind of central `bank' or depository, is a wholly-owned subsidiary of the BSX.

A separate company had to be formed to allow a guarantee of trade on the system for risk management purposes.

And it is this GlobalScrib technology which will allow the BSX to look into going into on-line trading.

Mr. Woods said: "Ultimately it could facilitate on-line trading."

Customers would still have to have a broker, who could give the purchaser a password to access the system, which will allow them to trade online after that in real time.

The system will also automatically work out the ownership of companies in order to comply with 60/40 ownership regulations.

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