Bermuda

Uniquely positioned: The BSX


By Greg Wojciechowski, BSX President and Chief Executive Officer (27/01/2009)

Bermuda is home to a thriving and dynamic offshore financial services industry. For many years, Bermuda has been the leader in creating and implementing the business and regulatory models that have become the standard for other jurisdictions to follow.

 

Bermuda is located within two hours’ flying time from most US East Coast hubs and a short flight to Canada. Daily air service to the UK and Europe make Bermuda the gateway between Europe and North America. Proximity to the world’s largest capital markets and global business centres has been a key ingredient in Bermuda’s success. Bermuda has carved out a niche in the global financial services industry which is well known and highly regarded.

 

Bermuda’s pragmatic commercial approach has created an operational, technical and regulatory infrastructure focused on clients’ needs which is the result of a collaborative effort between the private and public sectors of the jurisdiction. This model ensures jurisdictional policies remain in line with or ahead of market developments and keeps Bermuda’s regulatory oversight at prudent levels, whilst also maintaining support and appreciation for the entrepreneurial spirit that drives innovation.

 

This approach has driven the development and success of Bermuda’s insurance and global financial services industries.

 

Bermuda has been transformed from a tourist destination in the 1950s to the enviable position as being one of the most significant insurance and reinsurance centres in the world. At the end of 2006, the Bermuda Monetary Authority reported over 1,400 insurance and reinsurance companies on its register, with over US$100 billion in assets and capital and surplus of over US$110 billion (for the year ending 2005).

 

Historically, Bermuda was seen as a captive insurance jurisdiction. However, over the last 15 years Bermuda has evolved to become a global leader and is supplying 40% of the US and European market property catastrophe reinsurance coverage. Bermuda reinsurers rank 13 out of the top 40 in the Standard and Poor’s reinsurer rankings and 15 out of the top 35 AM Best reinsurer rankings. Bermuda’s foundation for success in a global marketplace has been its support of the capital markets, a centre of excellence with a diverse and talented underwriting pool and an effective and appropriate regulatory regime.

 

Household names, such as Citigroup, the Bank of New York, Nomura Securities, HSBC, Ace and XL Capital have established a presence in Bermuda.

 

The mainstays of Bermuda’s strength as a leader in the offshore financial services industry can easily be traced to the jurisdiction’s longevity in the business. As one of the early pioneers in the offshore financial services business, Bermuda has developed a commercially sensible level of regulation based upon years of experience, and has created products that meet the needs of its sophisticated client base. Bermuda’s experience has produced a deep and knowledgeable infrastructure of service providers. Bermuda’s infrastructure extends to services provided by global fund administrators, attorneys, banks, auditors and the Bermuda Stock Exchange (BSX). Bermuda has evolved to offer a sophisticated product to a sophisticated and selective client base.

 

A recent example of this innovative approach is the ‘Launch ‘n’ List’ product made available to the global hedge fund industry. Launch ‘n’ List is the result of collaboration between the Bermuda International Business Association (BIBA), the Bermuda Monetary Authority (BMA) and the BSX. Launch ‘n’ List was developed as a result of industry feedback which indicated a growing frustration among practitioners with the length of time they experienced when creating, domiciling and listing a structure. Launch ‘n’ List is a direct response to this frustration, as the procedure seeks to reduce and eliminate duplicate effort, which in turn reduces the amount of time to market.

 

The BSX has been in existence since 1971 and has carved a niche in the global stock exchange industry, with nearly 550 listed issuers with a combined market capitalisation of around US$330 billion. Offering a complete stock exchange solution in one of the world’s most respected and sophisticated off shore financial centres, the BSX trades and settles stock and cash transactions daily through its electronic trading, settlement and depository systems.

 

The development and success of the BSX has helped the growth of Bermuda’s capital market and has provided opportunities for international clients. The BSX’s commercially sensible regulatory approach dovetails with that of the jurisdiction, and is based upon currently accepted international regulatory and operational standards. It seeks to achieve an appropriate balance between providing issuers with access to the market at the earliest opportunity, and investors with certain safeguards and timely information for the purpose of enabling them to make informed decisions on the value, risk and merit of listed securities.

 

The BSX’s regulatory approach has been embraced by the global fund industry. Of the nearly 550 BSX listed vehicles, over 100 are hedge funds or have hedge fund attributes. Recently, the BSX has seen interest growing in the listing of fixed income products and derivative warrants, with over 100 derivative warrant structures listing in 2007 alone.

 

In 2008 an increasing number of international issuers and companies listed their securities on the BSX, which enjoyed record domestic trading volume and was designated by the UK’s Her Majesty’s Revenue and Customs as a recognised stock exchange. In addition, the trading and settlement technology of the WFE was upgraded to the next and latest version of the OMX trading platform, keeping the WFE’s mission critical systems in line with cutting edge technology for an operation of the its size.

 

BSX was admitted to America’s Central Securities Depositories Association in February 2008. The Caja Venezolana de Valores, SA (CVV), Venezuela and Barbados Central Securities Depository Inc. were also admitted.

 

In August 2008 BSX joined the European Securitisation Forum (ESF), an affiliate of the Securities Industry and Financial Markets Association (SIFMA). Th e ESF is a broadly based professional forum through which participants in the European securitisation markets advocate their common interests on important legal, regulatory, accounting and market practice issues. Th e ESF comprises investors, investment banks, legal firms, securities brokerage firms, stock exchanges and other financial services institutions.

 

In making the announcement BSX President and Chief Executive Officer, Greg Wojciechowski said: “The BSX is delighted to have joined and been accepted to membership of this prestigious group of industry professional that are committed to ensuring that the European securitisation markets evolve in a fashion that speaks to the current challenges being experienced generally in the securitisation markets globally and which promotes industry standards that provide additional disclosure, thus making this segment of the global capital market more transparent.”

 

The BSX’s international regulatory recognitions and longevity in the stock exchange business has resulted in the BSX becoming the location of choice in the off shore world for those entities wishing a superior level of support and distinction from their listing. In fact, over half of the funds listed on the BSX originate from other jurisdictions.

 

Going forward, Bermuda will continue to drive innovation in its core financial services industries. The stakeholders in Bermuda have always embraced change in anticipation of the potential opportunities that may follow.

 

From the BSX’s perspective, we see huge opportunity in the global stock  exchange industry for the BSX. Our unique approach in respect of our regulatory infrastructure coupled with our strategic geographical location and internationally recognised electronic stock exchange platform places the BSX in a very exciting position to take advantage of rapidly changing and expanding global capital market opportunities.