Bermuda: Offshore Investment
Local and International Equities
The Bermuda Stock Exchange (BSX) opened in 1971. It is a fully electronic open market with daily trading and centralised settlement. The BSX has traditionally been owned by three Bermuda banking institutions, and in 1992 was formed into a limited liability company. Trading memberships on the exchange are freely available to international brokers who meet BSX requirements.
The Exchange’s fully electronic clearing, settlement and depository service was installed in 2001. By the end of 2002 all of the domestic securities then listed on the BSX were depository eligible.
The BSX also introduced new regulations to make listing on the Bermuda Stock Exchange easier and clearer. The new regulations updated exchange rules for its members and standardised the wording of listings.
According to the exchange, the most significant change was the introduction of a new section, Section VI, in the International Regulations, which was designed to attract the listing of derivative warrants, a new market niche for the BSX.
BSX listings and compliance manager James McKirdy said: "The changes reflect input provided by members of the exchange and listed issuers over an extended consultancy period and experience garnered by the listings and compliance department during the last several years.'
Changes included a streamlining of the prospectus requirements for secondary listings of International Equity Securities (Section III). Under the new regulations issuers may submit their latest audited financial statements in lieu of a prospectus.
The exchange also formalised the waiver for disclosure requirements, as previously granted by the listings committee on an ad hoc basis, for restricted market collective investment vehicles, as defined in Section IV, in respect to the disclosure of investments and shareholder holdings.
The Bermuda Stock Exchange (BSX) is a Recognized Investment Exchange under the Investment Business Act 2003, and operates as a Self Regulatory Organization subject to regulation by the Bermuda Monetary Authority. The BMA is a full member of IOSCO. The BSX was the first offshore exchange (in 1996) to receive Designated Status from the US SEC. The BSX has issued regulations for Trading Membership, Domestic and International Listing.
In July 2004 Bermuda passed the Criminal Code Amendment Act 2004, which makes market manipulation and insider trading criminal offenses for the first time in the jurisdiction. The legislation imposes fines of up to BMD100,000 and a five year jail sentence for market manipulation, and a seven year custodial sentence and BMD175,000 fine for those found guilty of insider trading.
The government explained that the new laws were put in place following reviews of the financial services sector conducted by the International Monetary Fund (IMF) and the UK government.
In August, 2005, BSX was granted Designated Investment Exchange (DIE) status by the UK Financial Services Authority (FSA). Designation as a Recognised Stock Exchange by HM Revenue & Customs (HMRC) was also awarded in December 2007. This will give any Eurobond listed on the BSX the same exemption from withholding on interest payments that currently exists at EU exchanges.
It emerged in January 2007 that business on the Bermuda Stock Exchange had been given a considerable boost in 2006 after official recognition was granted by onshore authorities.
In the second half of 2005, the BSX was granted both Approved Stock Exchange status by the Australian tax authority, in addition to the aforementioned designation by the UK’s Financial Services Authority.
The two designations, coupled with the strong international BSX brand and the recent consolidation activity in the global stock exchange industry, resulted in a heightened level of interest in BSX products and the Exchange itself, the BSX said.
The BSX/Royal Gazette Composite Index ended the year at 4,860.32, up 25.1% compared with 2005. Domestic trading volumes increased from 2.9 million shares to 3.9 million shares with a corresponding value of over BMD120 million, one of the highest value turnover levels in the Exchange’s history.
The total market capitalization of the BSX as at 31 December 2005 (excluding fund listings) stood at over BMD350 billion of which approximately BMD2.6 billion represented the domestic market.
As at 31 December 2006, 428 issuers were listed on the BSX. Included in new listings were Jupiter Adria Limited, an international equity issue and 3 international derivative warrant issues. There were also 22 new collective investment vehicles listed and 49 subsequent issues processed during the year, including the local BAS and BF&M Rights issues.
In making the year-end announcement, BSX President and Chief Executive Officer Greg Wojciechowski noted:
“2006 has been a very exciting year for the BSX in terms of its strategic development. The receipt of the recognitions noted above has generated interest in the Exchange and further punctuated its role as the premier, fully operational offshore stock exchange. The BSX’s longevity in this business, its electronic infrastructure, its prudent regulatory approach and strong brand will position it well to take advantage of the exciting opportunities that are now presenting themselves in the quickly changing global stock exchange industry.”
The BSX also reported that 2007 was a significant year both for the Exchange and the continued development of the domestic capital market.
Highlights of the year, according to the Exchange, included an increasing number of international issuers and companies listing their securities on the BSX, record domestic trading volume and the designation of the BSX by HMRC as a Recognised Stock Exchange.
The BSX/RG Composite Index ended the year at 4,969.92, up slightly from the previous year’s close. Domestic trading volumes increased from 3.9 million shares to 5.3 million, with a corresponding value of over BMD165 million, the second highest value turnover level in the Exchange’s history.
The total market capitalization of the BSX as at 31 December 2007 (excluding fund listings) stood at over BMD350 billion, of which approximately BMD2.7 billion represented the domestic market.
By the end of 2009, there were 13,539 external companies, 1,250 exempted parternships, 588 overseas companies, 68 overseas partnerships, 15 non-resident insurance companies and 3,166 local companies on the register.
As at 31 December 2010, 807 issuers were listed on the BSX. Included in the new listings in 2010 was the Variable Note program of Lodestone Re. The Exchange also listed 124 international derivative warrants. There were also 55 new collective investment vehicles listed, and 7 subsequent issues processed during the year.
The BSX was not immune to the general problems of stock exchanges in 2008. The Bermuda market followed the trend by falling 30% in value as reflected by the BSX/RG Composite Index, which ended the year at 3417.00, a change of 1,553 points in total. Offsetting this decline was a market dividend yield of over 5%, which resulted in a net return of negative 25%. Domestic trading volumes increased from 5.3 million shares to 6.8 million with a corresponding value of over BMD99m.
The total market capitalization of the BSX on December 31, 2008 (excluding fund listings) stood at over USD226bn of which approximately USD1.9bn represented the domestic market.
By the end of December, 2010, total market capitalization of the BSX (excluding fund listings) stood at over USD319bn of which approximately USD1.4bn represented the domestic market. Total trading volume for the year was 64m shares with a corresponding value of US$112m.
The BSX closed 2011 with total market capitalization of over USD341bn (excluding fund listings) of which approximately USD1.4bn represented the domestic market. Total trading volume for the period was 6.5 million shares with a corresponding value of USD25.3 million compared to 64 million shares with a corresponding value of USD112 million for 2010.
Designations, recognitions and affiliations received to date by the BSX include:
- Recognised Investment Exchange by the Bermuda Monetary Authority;
- Designated Offshore Securities Market by the US Securities and Exchange Commission;
- Full Membership of the World Federation of Exchanges;
- Affiliate Member of IOSCO;
- Approved Organization Status of the London Stock Exchange;
- Approved Stock Exchange under the Australian Foreign Investment Fund taxation rules; and
- Designated as a Recognised Stock Exchange by the UK's HM Revenue & Customs
BSX has pages on Bloomberg and Reuters on which investment fund prices, NAVs and deals are displayed daily. BSX also offers the Offshore Funds Network through its own web server on which each fund can have its own page.
In November, 2002, the Bermudian government passed the BSX Amendment Act, abolishing stamp duty on share transactions.