The Jamaica Stock Exchange is to receive another big shot in the arm, with a totally new source of income flowing from the decision of the Financial Services Commission that all retail repurchase agreements, must migrate to the Jamaica Central Securities Depository Trustees Services (JCSD) effective 31st of August.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 require that the minimum amount for a retail repo that is now 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 December 31, this year.
Based on the fee structure the JCSD should earn around $50 million a year in fees from the securities supporting the repos. There will also be fees to be paid for each repo transaction, such transactions will be evidenced by an account held in the purchasers name at the JCSD. 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 name thus legally separating the ownership from the repo issuer during the duration of the repo agreement.
The stock exchange group will earn an annual fee for each dealer who is registered to deal in Repo securities by the JCSD. The fee structure listed on the Jamaica Stock Exchange has the annual fee at $100,000 with 20 dealers in the country the income from this source will be small only around $2 million per year if all of them sign on. The repo registration fee is likely to be the big income generator as each transaction will incur a fee based on its value.
The JSE enjoyed a very good first quarter this year with huge increase in income, a fare bit coming from one off type transactions but in addition increased trading activities flowing from increase trading levels on the JSE this year contributed to improved profits for the year to date. The JSE stock last traded at $6.23 on the JSE on Friday to gain over 300 percent for the year to date, but with earnings per share now looking like heading towards $1.50 level there is room for another surge forward for the stock. The company’s 2015 second quarter numbers should be out this week based on the released of the June 2014 quarter results on the July 23, last year.