October 2008

Exchange Update              

The Listings Department of the CSX has closely monitored fluctuations in volume of new listings and delistings as global financial markets have withstood the successive shock waves associated with the credit crisis.

Overall the robust nature of the CSX listings has been demonstrated by the increase in market capitalisation of all listed securities over the past 12 months from US$136 billion to US$ 189 billion. We have however anticipated reductions in deal flow from both the US and Europe and experienced requests to delist certain mutual funds and specialist debt securities as a result of redemptions and credit events. 

In particular we have been notified of several defaults triggered by payment difficulties on the lower rated or unrated tranches of certain listed CDO securities.  In consequence we have adjusted the focus of our marketing efforts to other areas notably the Middle East.

Overall the reductions in deal flow have been less than predicted. We have experienced a reduction in total listings of approximately 13% from this year's peak of nearly 1,900 listings to the current 1,650 with the greater weakness being experienced in the area of mutual fund delistings.

On the positive side however overall deal flow has been balanced by an increase in the number of specialist debt listings from 600 to 715 over the past 12 months, which represents nearly a 20 % increase.

Given global market conditions and the key role of the Cayman Islands with respect to capital inflows into the United States debt and equity markets the total listing number for the CSX in October 2008 of 1,653 compares  reasonably favorably with October 2007 listings of 1,689.

New debt listings have included a broad range of securitised, asset-backed and credit-linked products.  We have seen rapid growth in a new area of reinsurance/catastrophe bonds and also in new Eurobond listings.  Issuers of these types of securities benefit from the UK tax recognition of the CSX as a "recognised exchange" which allows listed issuers to make interest payments without deduction of withholding tax.

The Exchange's marketing focus in the Middle East has resulted in its first approved listing of Shari'ah compliant certificates by a Cayman Islands incorporated issuing vehicle. 

The first issue under this programme was of Murabaha certificates where returns are based on a series of contracts in buying and selling of commodities on deferred payment terms.  Although the first of its kind on the CSX, we were able to accommodate the listing within existing Listing Rules and so meet the issuer's tight timetable.    

The Exchange has also recently received enquiries on behalf of Middle Eastern and Indian based property funds consistent with our shift in marketing focus to emerging markets generally.  

Some of these funds envisage the issue of part-paid shares that would allow draw down according to the financing requirements of a property development and avoid the accumulation of surplus cash upfront.  The CSX rules allow for the listing of part-paid shares provided that the transferability of the shares is not restricted and investors have sufficient information to allow trading on an open and proper basis.

Although our rules do not currently impose specific requirements for property funds we are happy to consider such listings within existing rules for mutual funds, adapted as we see necessary according to the particular characteristics of the fund.  Typically, in order to ensure sufficient transparency, we will require the appointment of an independent property valuer to a fund. 

In summary, whilst the overall outlook for financial markets remains troubled in the short term we have been encouraged at the robust performance of the CSX throughout this period and the absence of any material downturn in our performance. We remain in close contact with our listed companies and are optimistic that our traditional qualities, a dynamic approach to listing and our ability to provide timely and flexible solutions in fast changing markets, will prove advantageous notwithstanding the short term challenges being faced in certain financial markets. It seems clear to us moving forwards as the current crisis abates that US and European funding requirements in general  will be increased not decreased and we anticipate that Cayman listed securities will continue to play their part  in that process.

Comment from the CSX Chairman, Anthony B. Travers, O.B.E. “Given the credit issues that have adversely affected the international financial markets and the resulting volatility, the comparative stability of the Cayman Islands Banking and Financial Industry in general and indeed the robust performance of the Cayman Islands Stock Exchange as evidenced by this report puts to the sword the spurious criticism of those commentators who have badly misunderstood and been critical of the role of the Cayman islands in facilitating capital flows to the onshore debt and equity markets. The facts are somewhat different from those which have been suggested and indeed we are pleased to have played a material part in assisting the US credit markets with their funding requirements both before and during in this difficult period. Those who have expressed criticism would be well advised to run models on how the US Financial Industry might have looked had the Cayman Islands not played its supporting role. No doubt, and as we have predicted, for the immediate future there will be consolidation in the hedge fund industry, and we anticipate less irrational exuberance in the structuring of debt. The failure of onshore regulators once again to effectively manage leverage in their financial markets has, adversely affected the Cayman Islands Financial Industry but it is closer to home that those charged with solving the issue of excessive gearing must look if they hope to find an effective long term solution.   It is true to say that comment to the contrary by certain officials of the International Bodies and others appears to show a continued and fundamental misunderstanding of the nature of the problem which does not currently bode well for the introduction of an effective solution. However, I am confident that with effective dialogue and more careful deliberation that that understanding will no doubt improve over time.  As with all corrections the strong will ultimately become stronger and I believe that the importance of the role that the Cayman Islands has played will be better understood and, indeed, universally admired. We are clearly good in the Cayman Islands at withstanding tempests."

CSX Welcomes New Broker Member and listing of VBT Holdings, Ltd

The Exchange recently held a listing ceremony to commemorate the admission to the Official List of its second current domestic equity listing, VBT Holdings, Ltd. VBT is a Cayman Islands incorporated holding company with two principal operating subsidiaries, Venecredit Bank &
Trust, Ltd. ("Venecredit Cayman"), recently granted broker membership by the Exchange, and Venecredit Securities, Inc., a Florida-based NASD regulated broker-dealer.

Present at the listing ceremony: (Photograph from right to left) Enrique Malpica, Deputy Manager, Venecredit Cayman, German Garcia-Velutini, President and Director, VBT, Margott Llares, Managing Director and Director, Venecredit Cayman, Maria Elisa Vasquez, Director, Venecredit Cayman, Valia Theodoraki, CEO, CSX, Deborah Drummond, Vice Chairman, CSX and Gerry Halischuk, Head of Markets & Compliance, CSX.

Company Profile Venecredit Bank & Trust, Ltd. is the Exchange’s newest broker member. Venecredit was established in 1987 under the laws of the Cayman Islands. It holds a category “B” banking and trust licence under the Banks and Trust Companies Law, a mutual funds administrator’s licence under the Mutual Funds Law as well as a securities investment business licence under the Securities investment Business Law. Venecredit is engaged in providing offshore banking and trust services to Venezuelan clients.

Company Profile Venecredit Bank & Trust, Ltd. is the Exchange’s newest broker member. Venecredit was established in 1987 under the laws of the Cayman Islands. It holds a category “B” banking and trust licence under the Banks and Trust Companies Law, a mutual funds administrator’s licence under the Mutual Funds Law as well as a securities investment business licence under the Securities investment Business Law. Venecredit is engaged in providing offshore banking and trust services to Venezuelan clients.

Company Profile Venecredit Bank & Trust, Ltd. is the Exchange’s newest broker member. Venecredit was established in 1987 under the laws of the Cayman Islands. It holds a category “B” banking and trust licence under the Banks and Trust Companies Law, a mutual funds administrator’s licence under the Mutual Funds Law as well as a securities investment business licence under the Securities investment Business Law. Venecredit is engaged in providing offshore banking and trust services to Venezuelan clients.

The CSX welcomes its two newest members of staff, Nina Greyling and Nick Small.

Nina Greyling

Nick Small

Nina, joined the Exchange last year and was recently promoted as Listing Executive. Nina joins the CSX from South Africa and is a graduate of Stellenbosch University.  Nina is currently studying for the Securities and Investment Institute's Investment Administration Qualification.

Nick practised as a solicitor in the Lloyd's insurance office of a London City law firm before joining the London Stock Exchange's listing investigations team in 1999.  Nick later joined the transactions team of the UK Listing Authority (a division of the Financial Services Authority) where he advised on a wide range of listed company transactions and participated in projects including a working group advising the European Commission on disclosure requirements for the Prospectus Directive.  Nick was seconded to the legal and compliance department of a major investment bank before joining the CSX as Deputy Head of Listing in June 2007.  Nick is a member of the Securities and Investment Institute.

For more information visit WWW.CSX.COM.KY