The nine public companies now being traded on the exchange are to be asked to stump up listing fees as the Guyana Association of Securities Companies and Intermediaries (GASCI) looks to become self-reliant.
It is seen as an acid test for the companies' commitment to creating a vibrant capital market despite some of them having seen their shares slide since the exchange opened in June 2003.
GASCI director Patrick van Beek says the exchange has seen some 23 million shares change hands with a turnover of $236M but the transaction fees from those trades are not enough to cover the costs of running the exchange. In fact turnover would have to reach $76M or 385 trades a week, every week, to meet the $10M budget. As such the exchange has written to the Guyana Securities Council (GSC) asking for approval of a rules change so as to allow the companies to be charged and is now waiting on their action.
GASCI had received a government budget allocation of $1.6M to cover a projected shortfall but has actually come under budget so probably would not need that money. But while pleased with the government's support, they see it as important they become self sufficient. As such van Beek prepared a paper which was submitted to the board in July that offered various proposals for self-funding. GASCI's rules allow for two classes of listings: those on the official list which sign certain agreements with the exchange. (Three companies have approached the exchange and been given registration forms but are yet to send them back); then there is the secondary list which under the current rules companies are not charged.
When the exchange was conceived it was seen that the lion's share of revenue would come from listing fees. However, after 16 months when listing was voluntary so as to encourage participation no company has listed.
The GASCI board decided that the best way to address this is to charge companies for being on the secondary list. They have sought legal advice on how this could be done and been informed that a change to the exchange's rules under the Securities Industry Act would be needed.
That entails writing to the council with a proposed amendment and with a concise statement of its substance and purpose as set out under Section 35. The board sent the documents to the council on October 11 which under the same section is expected to "forthwith" publish a notice in the gazette and one daily newspaper for three consecutive Saturdays inviting comments. To date this is yet to be done and there is some concern over the delay.
The proposal would see companies paying half the current listing fee which is .075% of total market capitalisation with a minimum of US$750 and a maximum of US$7500. This would mean four large companies - Banks, DDL, NBIC and Demtoco all paying the full amount of US$3750. While the other five would pay varying lesser amounts. All nine companies would contribute around G$4.4M on an annual basis and van Beek says this would go a long way to meeting the $10m budget. It could also be that companies would look to list fully, given the benefits.
van Beek sees it as an important test of the companies' commitment to the exchange which he says has given shareholders the valuable right to freely buy and sell shares.