By making full use of the efficient and sophisticated listing regime of the Cayman Islands Stock Exchange (the CSX), the world's leading financial institutions have helped to make the exchange one of the fastest-growing international stock exchanges.
The CSX is a private limited company owned by the Cayman Islands Government, but operating as an independent entity. It was originally set up to provide a listing facility for the specialist products of the Cayman Islands, namely offshore mutual funds and specialist debt securities. More recently, the facility has been expanded to include global depositary receipts and derivative warrants.
As is the case with all aspects of the Cayman Islands financial services regime, the listing and other rules of the CSX have been developed to provide an appropriate level of regulation. The operating standards of the CSX, in turn, place a premium on consistency, efficiency and professionalism.
In July 1999, the CSX was granted approved organisation status by the London Stock Exchange (LSE). The CSX was able to demonstrate that its regime for listed securities meets all the detailed criteria for inclusion on the list of approved organisations.
This was the first time that an offshore stock exchange had been added to the list. The CSX thereby joined such institutions as the New York Stock Exchange, Nasdaq and all the official exchanges in Europe and Japan.
The approved organisation designation means that securities listed on the CSX are eligible for trading in the LSE's international equity market and for quotation on the Stock Exchange Automation Quotation (SEAQ) international trading system.
The CSX employs the latest and most advanced technology, and the exchange has developed a fully electronic trading platform in partnership with Bloomberg Financial Markets. The trading facility is “order driven”; buy and sell prices and investors' trades are displayed onscreen, ensuring transparency for investors and guaranteeing visibility for the issuers at all times. Trades are executed automatically when buyers and sellers are matched.
Great emphasis has been placed upon ensuring that information concerning the activities of the CSX and its listed companies is accurate and promptly communicated to the market via its dedicated news wire service, also provided by Bloomberg.
In addition the CSX has recently developed a net asset value input system that will enable fund administrators to input the information directly and ensure that net asset values are received, validated and communicated to the market without delay.
The CSX has recognised the power and potential of the internet. The website, www.csx.com.ky, mirrors information posted on Bloomberg and provides interactive access to information and prices held by the CSX. There are also links to research by leading offshore fund analysts, enabling investors to make relative comparisons between the performance of various funds and market sectors.
The Cayman Islands is the world's leader in the offshore mutual funds industry. The CSX's clear, concise listing rules and fast, efficient service have underpinned its success as a listing venue for offshore mutual funds. Schroders, Lloyds, CIBC and Lehman Brothers are just a few of the world's leading asset managers to have benefited from a listing on the CSX. Several of the largest hedge funds in the world have also taken advantage of the CSX facilities.
A listing on the CSX can bring multiple benefits to a mutual fund. Because certain types of investor may only invest in listed rather than unlisted securities, a listing enhances the marketability of a mutual fund and gives it access to a wider investor base. For closed-end funds, where there is no facility to redeem, a listing on the CSX can provide a secondary market with a trading platform for both buyers and sellers.
The CSX carefully screens applications for listing and examines the parties involved. Once admitted to listing, investors know that a mutual fund has satisfied, and must continue to satisfy, the conditions for listing imposed by the CSX, which meet international standards.
The CSX specialist debt listing facility has attracted the attention of the major institutional arrangers for these types of issues. Merrill Lynch, Deutsche Bank, Chase Manhattan, Solomon Smith Barney and Lehman Brothers have all used the CSX for listing issues of asset-backed securities, credit-linked notes and collateralised debt offerings.
The CSX's understanding of this highly specialised market has enabled it to develop sophisticated listing rules. These have been specifically tailored to meet the needs of debt issuers and to accommodate the latest sophisticated structures and products.
The listing rules also reflect the fact that such securities are usually purchased and traded by a limited number of institutional investors who are particularly knowledgeable in investment matters. Accordingly, the rules focus on the disclosure of all relevant information, without imposing unnecessarily onerous conditions upon the issuer.
Unlike other stock exchanges, there is no requirement in the CSX's listing rules for a local listing agent to be appointed in connection with an application to list specialised debt securities. The lead manager or the issuer's legal advisors may deal directly with the CSX's listing department reducing costs and improving time efficiencies.
The CSX is constantly updating its listing rules to accommodate developments in the market and to provide facilities for new products and structures.
The new regime for depositary receipts provides the world's first listing facility for unsponsored issues.
The exchange has also recently introduced rules for derivative warrants. The CSX listing requirements, with their emphasis on disclosure of relevant information, are appropriate for the sophisticated investors which purchase and trade in these specialist products.
Over the past couple of years, the CSX has cemented its credibility. The combination of highly developed listing facilities, a pragmatic approach and efficient service make the CSX an attractive listing venue for the institutional products in which it specialises. As a result, the CSX is expected to continue to achieve significant growth in the number of listings over the forthcoming year.