Background

The potential for developing a stock market in Guyana has been of long standing interest to the Government and the public companies. It was a recurrent theme in CARICOM discussions, particularly with respect to launch of a regional market.

The British Government funded some preliminary investigation by Jonathan Miller to take place in 1988 and 1989. Harry Sasson, an American consultant wrote a proposal to develop an Over the Counter Securities Market in 1992. Shortly afterwards a wholly private and informal 'Call Market' was started up by a group of financial institutions and companies (ultimately being replaced by the GASCI market).

Winston Brassington, Head of the Privatisation Unit, produced a number of seminal reports and proposals in 1995/6, and arranged for the Adam Smith Institute (ASI) to undertake further work as part of the UK Department for International Development (DFID) funded project that ASI manages.

There were four elements to ASI's support of capital markets development:

· The legal and regulatory framework,
· The creation of the market institutions: GSC and GASCI,
· The making of the regulations giving effect to the Securities Industry Act, and
· Procurement, training and implementation of the trading system.

ASI's first contribution under the DFID project was a high-level appraisal of the legal framework for a market. It recommended legislation similar in some respects to that in Trinidad, but more simplified to reflect the less developed state of the Guyanese market and with a CARICOM dimension to allow for participation in a regional market as and when it developed.

The second piece of work was the issuance of ministerial orders and the making of regulations through which the Securities Industry Act would be brought into force. This was substantially achieved between 2000 and mid 2002.

During the same period the Guyana Securities Council was brought into legal existence, its members appointed, and premises provided in the Bank of Guyana building. The Guyana Association of Securities Companies and Intermediaries, a private company, was developed in parallel. Both entities were provided with ASI technical assistance and budgetary support from DFID.

In 2003 the GSC has started operational activity with some ASI assistance. It has registered the securities companies that are members of GASCI and the companies which have publicly held share capital. Finally, it has registered GASCI itself, as a securities exchange.

The final contribution has been the support of GASCI: drafting the rule book, advising on procedures, devising the trading system, assisting in the development of the software, and in training, testing and launch.

GASCI and the Stock Market

GASCI is the “Self-regulatory Organisation” registered by the GSC which runs the Stock Market. Investors give orders to buy or sell to brokers who are members of GASCI. The brokers currently comprise Beharry Stockbrokers Ltd, GNCB Trust Corporation, and Trust Company Guyana Ltd. The brokers execute the orders by matching them against outstanding orders on the electronic order book, or, if there is no matching order they leave their new order exposed on the book to await a matching incoming order as and when it arrives.

Objectives and Components of the Market

The establishment of the stock market directly realizes an objective of the Guyana Poverty Reduction Strategy Paper namely to “encourage and/or support [the] private sector to raise local financing for investment.

Although the basic functions of the market are extremely simple, they rely on an infrastructure of procedures, rules, personal skills and regulation which are more complicated. The launch of the market is, therefore, of wider significance than a mere trading facility; it bears witness to the capacity and functionality of the financial and regulatory system as a whole and as such contributes to the wider PRSP policy area to “enhance the macroeconomic framework”.

Critical factors to GASCI's success

GASCI needs to become self-sustaining. In order to do this, companies need to sign up to the official list in order that listing fees are generated. This can be achieved by lobbying companies whose shares will be traded, and to try to get companies that 'go public' to launch directly on the official list. Alternatively, income from other sources could be investigated, in particular changing to or including a transaction based fee structure and providing a service for allocating and pricing initial public offerings.

The Council must also be seen to be a strong regulator, so that people are confident in the workings of the market and they have a point of call in the event of complaints arising.

Links with regional stock markets and foreign investment

It is envisaged that cross listings with regional stock markets will be possible in the medium term to facilitate trading of companies' shares in more than one country in the region. This would give non-Guyanese investors direct access to purchasing the shares on their local exchange. This will facilitate foreign direct investment in the Guyanese economy.
 

(Source: Adam Smith Institute)