Business

The three things behind the JSE

Every Mickle

BY RANDY T ROWE

Sunday, October 20, 2019

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Hey everyone, this week we're continuing the series on simple investment explanations. By now I think most people have heard about the Jamaica Stock Exchange (JSE) and how well it has been doing, especially over the last five or so years.

On October 9th the Financial Times published an article in which it mentions that Bloomberg has once again tagged the JSE as the best-performing stock exchange over the last 12 months, out of the 94 stock exchanges that it keeps track of worldwide. This is a great thing and affects all Jamaicans positively, but it also naturally raises a question that some of us, especially anyone new to investing, may have; what exactly is the JSE?.

So this week I'll give a simple answer and also a few details that may surprise some of us.

So, what is it?

The JSE is a 50-year-old Jamaican company whose primary activity is to provide and develop a centralised marketplace for the safe, efficient and timely exchange of stocks and other securities (like bonds).

What a mouthful.

In simple language, it means that the JSE is a local company that provides a safe, efficient and regulated place where people can buy and sell stocks (and bonds, etc) from each other.

Now, get ready for another mouthful. The JSE says their main mandate is “the mobilisation of capital to facilitate the growth and development of companies and, by extension, the economy”.

What does that mean? It means that the JSE's job is to create a safe place in which any Jamaican can invest money in companies who want it in order to grow; and as the companies grow, that growth helps the people who invested, and by extension, helps the economy.

Simply put, the more companies that list on the JSE, and the more people like you and I invest in stocks (or any other listed security) the better it is for the Jamaican economy in the long term.

So we know how the JSE helps and what it is technically, but when we say “the JSE” we often mean “the place where you can buy and sell shares”. However,the JSE is actually not one thing, but many things. I'll break it down in terms of three broad things.

THING 1 – A GROUP OF COMPANIES

First of all, the JSE is what we mentioned above, a company that provides a marketplace to sell shares and other securities (like bonds), but did you know that the JSE is actually a group of companies? Yes, in its official financial documents the JSE makes it clear that it is actually a group of three companies,

1. The Jamaica Stock Exchange Company Ltd (JSE)

2. Jamaica Central Securities Depository Ltd (JCSD)

3. JCSD Trustee Ltd.

All of these companies have their part to play in carrying out the functions and mandate of the JSE. How do these companies help with that mandate? I'll tell you simply;

JSE – This is the place that actually provides the stock market service. In order to provide this service it acts as a:;

Operator: It runs the marketplace within which shares can be safely and accurately bought and sold between two parties.

Regulator: It sets and enforces the rules for the marketplace to ensure that everyone, whether they're a broker, company or ordinary trader, can participate in it confidently and in a fair, efficient and transparent manner. Since 2007 the JSE has had a specific division within it that handles this function, it's called the Regulatory & Market Oversight Division (RMOD).

Educator: The JSE does educational activities to inform people about the JSE itself, the stock market, and investing in general. They also offer courses that train market participants and prospective participants in various areas.

JCSD – The JCSD does a lot, but the simple explanation of what they are and what they do is that it's a company owned 100 per cent by the JSE, whose function is to keep track of the ownership of assets across the marketplace. It does this by storing the records of who actually owns what.

When a dividend is declared or a trade happens on the JSE, this is the company that actually records the movement in ownership from one party to the next.

It keeps track of this using a book entry system which allows the ownership transfer to happen without any paper records needing to be physically moved. This helps the JSE be more efficient.

JCSD Trustee Ltd – This company works closely with JCSD (which owns 100% of it) to provide trustee services to their corporate clients. While they have many trustee services and a long track record, they don't offer services for individuals seeking personal trustees, they only service corporate clients.

THING 2 – A STOCK

In 2013 The Jamaica Stock Exchange Company Limited became listed on its own stock exchange, trading under the ticker “JSE” after it completed an IPO where shares were advertised to the general public at a price of $2.85.

Since then the market value of the JSE has grown over 5000 per cent. Anyone who bought shares in that IPO and still has them has made superb gains.

The JSE continues to grow as a company as more companies do IPOs and more ordinary people like us get into investing. This likely means that in the years to come there is even more growth to expect for people who buy JSE's shares.

THING 3 – A MARKETPLACE

As I said at the start, when we hear “on the JSE” we often think about the marketplace itself that the JSE provides for securities to be traded. This is also correct, as the JSE is very much this.

There is actually a specific word for this kind of marketplace, it is “bourse”, it means “a market organised for the purpose of buying and selling securities, commodities, options and other investments”.

It's an old European word with some roots in the medieval Latin word “bursa”, which means “money bag” or “purse”. It's thought to have come about because of a popular inn in Belgium in the 13th century where merchants used to meet and trade which was owned by atheVan der Beurze family.

Over the centuries the name and the term blended into “bourse” but kept its meaning.

The Paris Stock Exchange has historically been known as the Bourse de Paris.

So now we know what the JSE is a group of companies, a stock, and a bourse. Now hopefully I've managed to grow your knowledge and maybe the next time you find yourself in a conversation about the JSE you have a bit more information that you can bring to the table, and maybe even a nice little tidbit on what a bourse is or which bourse is the best in the world.

Randy Rowe is a strategy consultant and lead writer for www.everymickle.com. He is not an investment advisor. He sometimes wonders if the designers of those small man-bags might have had more success if they had called it a burse…He still wouldn't want one though…


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