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3% stock limit for new BSE members

week told that those wishing to buy a piece of the Exchange would be allowed no more than three percent of the stock.

The revelation came as they were being advised of the terms and conditions under which they can join.

The invitation to potential trading members from the BSE owners also outlines new systems and controls, together with a strategic plan that is to be implemented.

The Exchange has also published a draft copy of the new trading membership rules, violations of which -- or any form of misconduct -- could subject a trading member to a discipline that ranges from a reprimand to a $10,000 fine to suspension or expulsion.

The regulations set out a list of possible breaches including insider trading and market manipulation. To improve the domestic securities market, the Exchange proposes to introduce a compensation fund to, for the first time, provide cover for investors who buy and sell listed securities through a trading member on the Exchange.

It will be used to assist clients of a trading member who suffer a loss as a result of a material breach of the regulations or other misconduct by the trading member where the member is unable to make good on the loss.

A new trading system will be implemented and new settlement procedures will be introduced in order to make processing more efficient and encourage turnover.

New listing regulations will be introduced to provide for full and timely disclosure of price sensitive information by listed issuers.

The division between the banks as proprietors and the trading members, said the document, will ensure Bermudian control, distance the banks from the day to day operation while allowing them to retain policy-making rights and facilitate moves to widen the ownership.

Applicants for trading membership must meet certain requirements. They include a continuous minimum net capital requirement of between $25,000 and $100,000 and a joining fee of between $5,000 and $20,000, both dependent on the category of trading membership. There will also be a $5,000 annual membership fee.

Trading membership categories include broker, broker/dealer and market-maker.

All three will have to make an annual contribution to the compensation fund.

But only the latter two will be allowed to sponsor new listings onto the Exchange, a new requirement being instituted.

The Exchange will also bring in an ad valorem transaction levy that has to be paid monthly by trading members on every purchase or sale of prescribed securities listed or approved to be listed, which is carried out by that trading member, whether as principal or agent, at the risk of suspension.

Application requirements also include the submission of a business plan, setting out objectives to be actively involved in the trading of securities on a full time basis.

Applicants must be a limited liability company incorporated in Bermuda (local 80/20 or 60/40 or exempted), and have an appointed independent auditor. They must satisfy the Exchange that they have the relevant experience, and, install and use terminals for the Exchange's new trading system.

Prospective trading members who apply by the end of May are able to subsequently apply for ownership of a portion of the 15 percent of the issued share capital of the Exchange that the banks are divesting themselves of, at the book value of the Exchange's shares.

But none of the "Bermudian Founder Trading Members'' will be eligible for any more than three percent of the stock.