The repo market in Jamaica is undergoing major changes and is set to take another leap forward that is meant to better protect investors. The changes mean that smaller players can no longer participate in this market unless they pool their resources.
Financial Services Commissionstated that “effective October 2014, a minimum amount for a retail repo was set, currently the level is J$500,000 and US$5,000 and is scheduled to be increased on a phased basis to $1 million and US$10,000 by the end of December, this year.” The big change is that the securities supporting retail repurchase agreements, must migrate to the Jamaica Central Securities Depository Trustees Services (JCSD) effective the end of August, the entity approved for such services.
According to Robin Levy, Manager of the JCSD they will be trustees for the assets that back the repos, as such the dealers will no longer hold them directly in their names thus legally separating the ownership from the repo issuer during the duration of the repo agreement. Each repo transaction will be evidenced by an account held in the purchasers name at the JCSD. Owners will be able to view these accounts over the internet, in the same manner as is currently done for investments in stocks listed on the Jamaica Stock Exchange. There will be no charges levied directly on the investors. Fees will be charged to and payable by the dealers.
The total book of repurchase agreements amounts to approximately $500 billion as of March this year, the amount to be transferred may be lower has the FSC new regulations chips in to eliminate smaller amounts. The Jamaica Stock Exchange will generate significant income from this line of business.
The change in the size of the amounts that can go into repo means that some financial entities will lose some of the funds they now control, others will encourage their clients to shift the funds to unit trust where they have such vehicles. Moving funds to unit trust will generate fee income but the unit trust investors will benefit from any underlying gains from the appreciation from the assets where this may occur or suffer losses from such investments if the assets were to fall in value. Of course the management company may sell the unit trust repos as well hence shifting the potential gains or losses in their favour.

The repo market in Jamaica is undergoing major changes and is set to take another leap forward that is meant to better protect investors. The changes mean that smaller players can no longer participate in this market unless they pool their resources.
Financial Services Commissionstated that “effective October 2014, a minimum amount for a retail repo was set, currently the level is J$500,000 and US$5,000 and is scheduled to be increased on a phased basis to $1 million and US$10,000 by the end of December, this year.” The big change is that the securities supporting retail repurchase agreements, must migrate to the Jamaica Central Securities Depository Trustees Services (JCSD) effective the end of August, the entity approved for such services.
According to Robin Levy, Manager of the JCSD they will be trustees for the assets that back the repos, as such the dealers will no longer hold them directly in their names thus legally separating the ownership from the repo issuer during the duration of the repo agreement. Each repo transaction will be evidenced by an account held in the purchasers name at the JCSD. Owners will be able to view these accounts over the internet, in the same manner as is currently done for investments in stocks listed on the Jamaica Stock Exchange. There will be no charges levied directly on the investors. Fees will be charged to and payable by the dealers.
The total book of repurchase agreements amounts to approximately $500 billion as of March this year, the amount to be transferred may be lower has the FSC new regulations chips in to eliminate smaller amounts. The Jamaica Stock Exchange will generate significant income from this line of business.
The change in the size of the amounts that can go into repo means that some financial entities will lose some of the funds they now control, others will encourage their clients to shift the funds to unit trust where they have such vehicles. Moving funds to unit trust will generate fee income but the unit trust investors will benefit from any underlying gains from the appreciation from the assets where this may occur or suffer losses from such investments if the assets were to fall in value. Of course the management company may sell the unit trust repos as well hence shifting the potential gains or losses in their favour.