The JSE - A comedy of errors or a mismanaged market?
Jamaica Stock Exchange building
A Business Observer special investigative report on the JSE technology transition

As we continue to review the challenges which face the Jamaica Stock Exchange (JSE) which have become more pressing in the COVID-19 era, it is seen where technology upgrades and an improved system of accountability, alongside penalties for failure, could impact performance.

Before the JSE moved over to the Nasdaq platform, it had individual distinguishing ticker symbols for stocks cross-listed on the Main and USD Markets. Since the move to the new platform in December 2019, the JSE attempted to separate the prices by currency and removed the symbol identifiers (Proven vs ProvenJa) to make for a more seamless internal process.

However, that attempt has been a failure and resulted in Proven's stock price being valued higher than the Jamaican economy at one point.

For other dual currency listed stocks, the data set of Sygnus Credit Investments Limited (SCI) between November 25 and December 2, 2019, is totally erratic. There are four listed securities for Sygnus Credit which are SCIJMD and SCIUSD listed on the Main and USD Market. SCIJMD has a price of J$13.06 in the week of November 25 and a price of J$23.31 by December 2. However, SCIUSD (Main Market) has a price of US$0.14 in one week and US$13.06 in the week of December 2. This error between the four securities means anyone building an excel or price chart of SCI must adjust the data to conform since its listing. Pricing errors can have detrimental effects to the users of JSE data especially since this error is still present.

The JSE manages the daily update of information relating to Sagicor Select Funds on the market data section of its website. The same pricing errors had caused issues for the dual currency listed stocks. Even the purchase of Guardian Holdings Limited had an issue as the current value wasn't reflected on the day of purchase.

At one-point, incorrect information was being sent to Bloomberg about the company's prices directly from the JSE. A local Bloomberg user disclosed that incorrect price information added to internal workloads as staff had to inform Bloomberg and correct it for their updates.

Some of the pricing issues have been resolved for Proven Investments and Sterling Investments, but there needs to be better control mechanisms.

Nasdaq Introduction

Earlier on, during the last month of 2019, the JSE launched the Nasdaq platform to the public. Technical difficulties in the transition led to several trades being cancelled without question, money being held by the Jtraderpro platform and even incorrect pricing information being displayed.

Auditing Processes

During the early stages of the novel coronavirus pandemic in early March, the Jamaica Observer received a call from an auditor who had been desperately trying to get in contact with a member of the Jamaica Central Securities Depository (JCSD) to complete their assignment before the deadline which was less than two days away.

They had sent the request to the JCSD from the start of the month and even when it was near the end of the month they had not received a reply on that request. They attempted to call and had sent numerous e-mails to which they were unable to get a response or get through to anyone at the office.

The company ended up submitting that assignment late because of the JCSD's mishandling of the request and lack of communication to the organisations about the change in operations due to the novel coronavirus at the time.

Full disclosure

In addition to delaying market news, The JSE at times can take days to release information or not even publish information provided to it, leaving out important details such as the cost of a transaction.

Because of the JSE's delay and even non-publication of news, the Trinidad and Tobago Stock Exchange is the best place one can access information for cross listed information since an arbitrage moment can arise where the information released on the TTSE in the morning might not appear on the JSE until the evening.

This issue becomes even greater when the JSE does not publish information which the TTSE has made available to the public on their news section. The JSE's delay and lag in publishing information has created an information gap in the space that can lead to a stock's potential action being delayed by days or not happening at all based on new information. It can take up to one week or more for the JSE to publish a dividend meeting announcement when the information was sent to the JSE on the same day of the meeting.

A clear example of this is the fact that Fontana Limited's May dividend consideration cannot be found on the JSE's website but can be found on Mayberry Investments Limited's website. When a company declares a dividend, that news is shared on the news section of the JSE's website. Mayberry Jamaican Equities Limited's dividend declaration was published on May 26 when the payment date was May 31. This happened in spite of the information being available before under the corporate action section of the JSE's website but not under the news area.

This potential bias for the processing of information shows an area of weakness in the JSE which needs to be fixed.

From a review of the JSE weaknesses, some of the recommendations being proposed include amendment of the JSE Rules on hard copy submission.

If a company submits their soft copy documents to the JSE, that should count as the primary stage of submission with the JSE's request for hard copy documents being only requested in certain cases.

It should not be that a company is considered to have submitted an annual report late when the hard copy comes after the deadline despite a soft copy being sent to the JSE.

It is noted that many companies provide little to no comprehensive explanation to shareholders in their quarterly financials. Some only publish the financials and shareholders report only. This is made worse when annual reports shed no light on critical events which happened for a company during the year. Some companies go as far as to only make disclosures known via the media and state nothing in their reports. The problem with this is that it creates some unnecessary speculation and leads to a greater information gap in the investing space.

It is recommended that the JSE rephrase Rule 407 about supplementary information and provide templates to companies for them to submit their financials. This is typical of 10-Qs and 8-Ks in the US where the form is machine readable and can be navigated without difficulty. It would ensure everything is in a crystal-clear format and that there is no ambiguity in what figures are being read. Many reports sent to the JSE are poorly scanned and barely readable to some users.

Until the Securities Act is amended, it is understood that some requisite disclosures will not become mandatory, but the requirement for an MD&A should be mandatory by the exchange.

Platform for Submission and Posting by JSE

Though the JSE has created a platform for companies to submit information such as dividend announcements, quarterly reports and events, not all companies are using it as yet. Thus, the JSE will still format information sent to it in a particular way or forget to publish the information altogether.

An example of this is the Jamaica Broilers Group dividend declaration last Wednesday. The notice stated, “JBG has declared a Dividend at a meeting of its Board of Directors. On October 27, 2021.” Nobody knows the amount paid and no longer sees the post since it was deleted. This isn't the first missing information submission, as seen with Barita Investments' unaudited Q4 2020 results and Sterling Investments Limited's 2020 annual report where no file was attached.

Any entity which uses mandatory field systems, submission checks and field validation would not have missing information. The fact that information should pass through a number of people at the JSE before being published shows that there is an obvious end stage failure.

There is a need for updating Junior Market Rules. As it currently stands, Junior Market companies enjoy some level of freedom in breaking the rules since there is no financial penalty nor true punishment other than a lower CGI score. Main Market companies are subject to fines while Junior Market firms breach rules as per the JSE monthly regulatory reports. As long as a Junior Market company does not get suspended or delisted, it is able to break rules with no fear of subsequent recourse.

After five or 10 years as a listed Junior Market company, the same penalties which apply to Main Market companies for failure to disclose or publish reports on time should apply to Junior Market companies. These companies have mentors or, in the absence of one, a JSE board member guiding them through their lives as Junior Market companies.

It is not clear why such companies should spend their entire lifetime on the Junior Market with no mandatory graduation period and be able to flaunt rules as much as they want. This is a grey area which should be addressed.

Expansion of the JCSD

The JCSD is obviously struggling under the current structure which has seen some newly publicly listed companies have as much as 10,000 plus shareholders. When combined with the current system which has left many shareholders without dividends and little room to recover them in an expedient manner, it is clear that the JCSD might cave under pressure in a few years if the current rate of listings grows any faster.

SCIUSD Main Market: A chart showing Sygnus Credit Investments Limited USD (JMD) price over 2 years.
SCIJMD Main Market: A chart showing Sygnus Credit Investments Limited's JMD price over 2 years.

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