T&T Targets DRs in Bid for Liquidity

Trinidad and Tobago’s SEC is hoping to push through legislation in coming weeks to allow for the creation of a depository receipts (DR) board on the country’s stock exchange, Osborne Nurse, chairman of the SEC, tells LatinFinance. The move, wholly backed by the finance ministry, is an attempt to introduce market innovations that will give local investors more investment options and stimulate trade. The idea to do so was derived from RBC’s acquisition of RBTT, which will remove the latter’s shares from the local exchange, thereby cutting some 13% of the country’s entire market capitalization of roughly $20bn, says Nurse. The SEC requires that RBC list a DR in Trinidad to replace the shares it is buying. The hope, says the chairman, is to permit brokers to create and list DRs of foreign companies that are active in Trinidad, such as BP, BHP Billiton, Repsol and Mittal Steel, and offer them to local investors. The DRs would not be sponsored by the company, and the value would represent a fraction of that company’s stock, while mimicking the trading behavior of its native exchange. Nurse says the ratio of the DR to the original stock could be roughly 1:10, with a price per DR in line with the TTD30-TTD40 range seen in locally listed shares. In order to accurately mimic the trading behavior of the underlying stock, Nurse says the SEC will establish a market-making program and new regulation allowing for DR short-selling and lending.