Trading on Guyana’s first, private stock exchange will begin on Monday thus providing a mechanism where companies can raise funds for investment and the general public can take a stake in the capitalist pie.
The intermediaries between the investors and the publicly traded companies are three registered brokers, Demerara Trust Company, Beharry Stockbrokers Limited and GNCB Trust Company.
Only companies registered as reporting issuers with the Guyana Securities Council (GSC), the body established by the government to oversee the development of the capital market, would have their shares traded on the exchange. Any other company wishing to have their shares traded or to raise capital would have to register as a reporting issuer with the Council.
Eleven companies have so far registered as reporting issuers including four commercial banks, Demerara Distillers Limited, Banks DIH, Guyana Stockfeeds Limited, Demerara Tobacco Company Limited, Sterling Products Limited, JP Santos and Caribbean Containers Ltd.
The Minister of Finance, Saisnarine Kowlessar and the GSC on Monday approved the registration of the Guyana Association of Securities Companies and Intermediaries Inc (GASCI), the private stock exchange, as a self-regulating organisation effective Monday June 30.
Six mock demonstrations with registered representatives of the brokers have being undertaken to prepare for Monday’s opening “bell”. Trading is initially expected to be once per week and may not last more than an hour or two.
On Wednesday Stabroek News witnessed the mock trading session at GASCI’s offices in the Hand in Hand building on Robb St and Avenue of the Republic.
Acting Chief Executive of GASCI, Patrick van Beek explained that if someone is interested in buying shares in a company whose shares are listed on the exchange, a registered broker would first have to be contacted. The broker may require that the person set up an account with them. Once this is in place, an order can be placed via the phone unless the broker requires that money for the transaction be lodged or the share certificate, in the case of a sale, be lodged.
The broker is then required to record the order to buy (bid) or sell shares (offer) in his order log book, which contains details on name, order reference, date, time of the order, quantity, status (buying or selling) and the price.
The broker would then see if a matching order can be found in-house based on the previous day’s selling/buying prices. If a matching order is found, then the transaction would be executed in the broker’s office and this is known as a cross.
A report of the trade would then be forwarded to GASCI before the start of the next trading session. If an in-house match is not found, the trader takes the order to the exchange.
Trading can only begin on the floor after the `market official’ (Clarence Perry or Lindsay Bascom with GASCI) opens the session to allow the brokers access to the exchange. The exchange being three computer terminals in a room. Once the market is open, the brokers log on to the system and view the orders of the other brokers. Matches are done verbally and then recorded in the system.
If there are no matches to orders, these are entered into the system which allows brokers to view it on the limit order book display.
When an order is entered and another broker has a matching order to sell, or an order which does not specify price and gives him discretionary powers to make a match and this is done, the transaction is completed and a trade report is filled in by both brokers. This trade report is given to the market official who is to check it thoroughly to ensure that it is valid before he enters it into the system as a confirmed trade which generates a market contract. The market contract, together with the details of the buyer and seller prepared by the selling broker, forms the transfer form which provides the customer with proof of ownership of shares purchased.
In placing an order, a customer can specify the price limit or give the broker the discretion on price. Orders which carry a fixed price by the customer, are called limit orders. Discretionary orders on the other hand give the leeway for brokers to negotiate the most favourable price on a buy or sell order. Should a customer instruct a broker to deal at “best” this means that he/she is prepared to deal at whatever price is offered or bid in the market.
The rules are that orders have to be dealt with based on price and time priority with price taking precedence over time. Price priority is determined in a descending order for bids (buying) and ascending order for offers (sale).
There are various rules, which govern the engagement of the trading, and the Guyana Securities Council has approved these.
Guyana’s first stock exchange has been close to seven years in the making.
Such a market allows owners of securities to buy and sell at a fair price. It also is a mechanism whereby companies can raise capital by the sale of shares or the floating of bonds. In most developing countries, the stock market is one of the ways persons save for their retirement. But in Guyana, while the volume of savings is regarded as high, the custom has been to hold these in bank deposits earning at the moment very low interest rates.