Islands stock exchange plans for more diversified growth
FOLLOWING a 44% increase in listings last year, The International Stock Exchange is now looking at other ways to diversify its business including listing more local commercial companies and helping them attract capital.
Business at the local stock exchange, which now has offices in all three Crown Dependencies, is continuing to forge ahead this year following a 16% increase in listings in 2015 and the very substantial increase last year when headcount at TISE also increased 27%.
‘We have developed the exchange in a number of ways, and new business is coming in through a variety of sources,’ said the exchange’s Guernsey-based head of communications, Mark Oliphant.
‘Things have moved on quite a lot since the old Channel Islands Stock Exchange days.’
A major change was to split the company in two, so that promotion and regulation were separated, and the rebranding has reflected the international nature of their business. Last year BaFin in Germany was the latest regulator to give it the seal of approval.
Much of the current growth comes from the listing of high-yield bonds, which find new European regulations cumbersome and so use the islands rather than Ireland or Luxembourg.
It is now estimated that between 85-90% of all new high-yield bonds issued come to TISE rather than EU centres. That initially caused negative comments from those centres, but the Association of Financial Markets in Europe found that the quality of service was comparable and the standards high.
‘Many of the companies are private but are listed and so have that visibility; they are not coming to the islands to hide or avoid scrutiny,’ Mr Oliphant said. ‘They are coming for the service.’
The success in this area is evidence that regulating according to the type of investment provides flexibility in the islands, in comparison to unnecessarily onerous rules in the EU. In the second half of last year, 50 issuers of high-yield bonds chose TISE on which to list, including a 1.3 billion-euro high-yield bond from Netflix.
Alterations to the Real Estate Investment Trust regime in the UK has also produced growth in business for TISE, Mr Oliphant said. Companies investing in property in the UK have to be UK tax resident, although they can be incorporated in different jurisdictions. They also have to be listed on a recognised stock exchange, and a quarter of all UK REITs are now listed on TISE, Mr Oliphant said.
In among all this financial services activity, TISE is still keen to provide traditional stock exchange services to local and UK trading companies. Exchange officials believe that, particularly due to the uncertainty surrounding Brexit, TISE offers an a more stable alternative venue for small and medium-sized businesses. Bank lending and alternative finance are also hard to come by, and raising capital on TISE could be more cost effective, they point out.
In fact, there are already some signs of interest in raising finance on TISE, although the most recent example involved a finance company rather than a traditional trading business.
PraxisIFM, which has 42 billion euros in assets under administration, listed on TISE last April, and has just completed one acquisition and raised £10m on the exchange to fund future growth.
Dr Simon Thornton, the chief executive of the group, which provides a range of professional services to private individuals, families and corporate clients around the world, said that listing had been part of their growth plans.
‘The attraction of listing included extending our international reach and profile, enhancing our ability to attract and retain staff and give us access to capital markets,’ he said. ‘Less than a year on from our initial listing we are seeing those potential benefits come to fruition and we are ready to make further acquisitions as and when appropriate for the group, shareholders and our clients.’
Last week the company, which has a Jersey trust operation employing 65 people, completed the acquisition of Dutch firm KOMPAS International, whose ten-strong team will continue operating as PraxisIFM Netherlands.