The Bermuda Stock Exchange (BSX) is now powered by a new technology platform which it hopes will supercharge its ability to facilitate and act as an exchange for trading in securities including catastrophe bonds and insurance-linked securities. The BSX has chosen the NASDAQ OMX Group, Inc.’s X-stream trading platform to power the exchange bringing significant enhancements in technology and up-to-the-minute trading functionality.
“The Bermuda Stock Exchange has always been focused on investing in technology that ensures that our trading platform is among the most advanced in the world and that further extends our leadership over other competing exchanges,” commented Greg Wojciechowski, President and CEO of Bermuda Stock Exchange. “By deploying the industry’s leading trading engine, we are making clear to the domestic and foreign markets that we are dedicated to operating a powerful, open marketplace.”
The BSX is home to more than $6.5 billion worth of insurance-linked securities and catastrophe bonds as the exchange where these notes are listed. So it is natural for the BSX to make itself ready should any investors or dealers wish to trade these ILS and cat bond notes on an exchange.
The BSX has actually had a fully electronic stock exchange platform for over 10 years enabling it to facilitate trading, clearing, settlement and securities depository services. Greg Wojciechowski told us; “By upgrading our system to cutting edge market technology and by having over a decade of experience in running all aspects of a modern exchange platform, the BSX is uniquely positioned in the offshore financial centre arena to provide premium listing and secondary market exchange support service for our listed issuers.”
With secondary cat bond and ILS trading currently the domain of over the counter brokerages, trading desks at major reinsurance brokers and capital market desks at some reinsurers, any move to bring trading onto an exchange would be positive for investors in the market in terms of price discovery and transparency.
Given the relatively small size of the ILS and cat bond market currently perhaps exchange based trading is not at the top of market participants priorities, however as the market grows it is likely to receive increasing levels of attention. If the exchanges (the CSX recently launched its ILS trading capabilities too) can offer a low-friction, and perhaps cheaper, alternative to trading in secondary ILS and cat bonds via brokerage desks, they could well see trading volume moving onto their platforms.
Wojciechowski continued; “We have been dialoging with key players in the ILS space and stand ready to provide secondary stock exchange support services using the BSX platform. Bermuda is a leader in providing cutting edge solutions for the global insurance and reinsurance market and the enhancement of the BSX technological infrastructure underscores that the BSX is committed to ensuring that Bermuda’s capital market keeps in pace with market needs and helps create a conducive environment for the convergence of the insurance and capital markets in Bermuda.”