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Local Stock Exchange Could Bolster Economy, Task Force Reports

Aug. 7, 2006–The implementation of a local stock exchange could bolster a fledgling financial services industry, provide an avenue for individuals and businesses to trade locally, and stymie the effects federal regulations have had on the territory's Economic Development Commission's tax incentives program, according to members of the government's Stock Exchange Task Force.
At an informal meeting held Monday at the Earle B. Ottley Legislative Chambers on St. Thomas, the task force reported to senators on plans to establish a stock exchange, and justified a $650,000 appropriation included in the miscellaneous section of this year's executive budget for a feasibility study that would determine whether a local exchange is right for the territory.
According to Nathan Simmonds, chairman of the task force, the appropriation would primarily fund the study, along with a technical assessment of the territory's infrastructure and a legal analysis of rules and regulations needed to regulate the stock exchange.
Another $12,000 would allow members of the task force to travel to the mainland and neighboring Caribbean regions to observe how other established exchanges function, Simmonds said. "In order for us to determine whether a stock exchange is feasible for the Virgin Islands, we have to have the funding."
During the meeting, Anthony Weeks, vice chairman of the task force, said the benefits of establishing a local stock exchange included the ability to attract new investments to the territory, to enhance government tax revenues, to build the private sector and to position the Virgin Islands as the "financial capital of the Caribbean."
Weeks said the establishment of a stock exchange on the mainland has helped to make the U.S. "the largest economy the world has ever known." Similarly, the establishment of stock exchanges in locations such as St. Kitts and the Cayman Islands has helped to transform neighboring economies into "cutting edge" securities markets, Weeks said.
Simone B. Jones-Hendrickson of the task force said, "Buying and selling stocks is one of the most competitive markets there is." He said the establishment of a stock exchange could also have numerous, positive spillover effects into the local economy.
Jones-Hendrickson said that stock exchanges bring buyers and sellers together on a "secondary market," where stocks initially bought by various individuals and institutions are sold to other entities.
Stock prices are determined by the stock market, and are closely linked to a company's operational efficiency, as well as its ability to meet the demands of consumers by being "innovative" and attracting "cutting edge technology."
Testifiers said the territory is poised to meet such criteria, and "boasts" a large telecommunications industry that is "waiting to be tapped into."
John Schaible, chief executive officer of NexTrade Holdings Inc. (a mainland company that develops solutions for stock and securities exchanges), said the territory also has "key ingredients" such as a "superior" technology infrastructure, an "internationally trusted" economic infrastructure, an environment that would allow for the growth of a stock exchange, and a government "with the foresight" to support the concept of a local stock exchange.
"Can a stock exchange succeed in the USVI?" Shaible asked. "Of course it can; it need only be properly supported and properly pursued."
Shaible said the task force and the stock exchange would need to be "properly funded," noting that the private sector may have to invest upwards of $10 million to keep the stock exchange viable.
"As one of the private investors looking to fund such an exchange, I urge you to fully fund the legal process," he told senators. "It is worth the investment and could rebound back to the USVI several times over."
While Shiable told senators that it may take at least a year to establish a stock exchange, allowing that various rules and regulations governing the project would have to be tailored specifically for the territory.
Simmonds said the task force is not ready to say that a stock exchange will definitely be established.
"We have to do the study first," he said. "There are many questions that we need answered, such as how the stock exchange will be structured, and whether it would be regulated by the government or the private sector. We may even decide that such an endeavor may not be right for the Virgin Islands. We just need to make sure that we look at all the angles first to determine whether the idea is really feasible."
Since the task force began working on the project last March, Simmonds said that the $650,000 appropriation should be made "immediately" in order for the study to be completed.
Present during Monday's meeting were Sens. Craig W. Barshinger, Roosevelt C. David, Liston Davis, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Louis P. Hill, Norman Jn Baptiste, Shawn-Michael Malone, Terrence Nelson, Ronald E. Russell and Usie R. Richards.

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