."Securities Exchange" company to open in St. Maarten in 2012

July 27, 2011 10:48 AM

PHILIPSBURG--A "Securities Exchange" company has announced its intentions to establish operations in St. Maarten in August 2012 and has projected its first-year taxes at more than US $30 million.

Principal founder of the group that will build and launch the project Michael Miller said in a press release that he had met personally over the past several months with the leaders of the "four" political parties in Parliament, each of whom he said had expressed his or her support for the project.

However, the leaders of the two largest parties in Parliament – Romain Laville of United People's (UP) party and William Marlin of National Alliance (NA) – said they had not met with Miller and had no knowledge of the initiative in question.

Laville said he could not comment on an initiative of which he had no knowledge. He said he would be willing to look at the proposal if it was beneficial to St. Maarten.

The company announced in a press release on Monday that its operation would be a 100-per-cent-electronic market serving global clients, in which equity securities, debt securities and specialised derivative contracts would be issued and traded.

Miller said the corresponding brokerage would provide international investors and traders with access to the exchange and would offer specialised investment services.

The company has undergone a "rigorous, 60-day evaluation and selection process," Miller said, adding that it had chosen St. Maarten as the site for its "world-class securities exchange" company.

The owners of the exchange and brokerage will consist of a small group of individual businessmen and investors, Miller continued. That ownership group will be finalised over the coming three to four months, he said. A St. Maarten NV has been formed and the company is in the process of converting it for use as the starting point of its local operations.

Jobs

Miller said the exchange together with a brokerage to be formed by his group were expected to "create scores of new jobs on the island, generate millions in new tax revenues annually for government and serve as the beginning of an expansion of the country's economy beyond real estate, hospitality and tourism."

Miller could not say immediately how many new jobs would be created, when asked by this newspaper. He said the company was "at the very beginning of a complex process and at this point, generalities are all that we have at our disposal. It would be irresponsible of me to make specific jobs projections before fully assembling the management team that will be responsible for building and staffing the operations in St. Maarten."

He said there were "many, many types of jobs that will be filled from the local workforce. In fact, our goal is to maximise the employment of the St. Maarten workforce within our operations, wherever possible. Importing labour is very expensive and is typically problematic and fraught with challenges.

"Types of jobs that will be filled locally will include accounting, graphic design, human resources, administrative, clerical, physical security, janitorial, marketing, sales support and many others. Because the exchange will operate 24 hours a day, many positions will require four or five workers to fill.

"The jobs that will be filled from abroad will not be taking work away from local applicants, because by and large there are no high-level executive managers in the securities industry, cutting-edge information technology personnel or other securities professionals present here."

When asked, Miller said too that it was premature to discuss the nature of the investment instruments the company would be handling once established, as these would need to be vetted and approved by the Central Bank and St. Maarten's regulatory authorities. He said the news of the company's launch would be a media event in and of itself, probably in the second quarter of 2012.

The press release quoted Democratic Party (DP) Member of Parliament Roy Marlin as saying this initiative was "a turning point for St. Maarten." The release said Marlin had first learned that the island was being considered as a potential site for the project during a meeting with Miller in Philipsburg in November 2009.

Why St. Maarten?

Miller said St. Maarten's constitutional change on October 10 last year had "vaulted St. Maarten to the group's short list of possible locations for the exchange project."

Speaking of discussions he claimed to have had with the leaders of the four factions in Parliament, Miller said, "This broad support represents an act of political willpower aimed at taking ownership of the country's economic future. ...

"In particular, Roy Marlin was instrumental in bringing the project to St. Maarten. Nearly two years ago he saw the vision of a new future for the new country and was tireless in his efforts to ensure that St. Maarten would be chosen for the opportunity."

The release said Ministry of Tourism, Economic Affairs, Transport and Telecommunication Acting Secretary General Miguel de Weever had served as the primary government representative in the 60-day selection process.

"He took on a great deal of additional work, met a challenging deadline and did a marvellous job in tying together government's efforts to land the project," it was stated in the release. "All that remains to finalise the group's selection of St. Maarten is the issuance of a Letter of Comfort by the Council of Ministers. That letter will summarise the last two months of discussions between Miller and government and is expected to be forthcoming later this week."

The details of the Letter of Comfort and exactly when it will be issued could not be ascertained on Tuesday.

Miller said he was not at liberty to discuss whether another jurisdiction had been considered for this initiative, what other jurisdictions had been considered or what their strengths and weaknesses had been.

"However, we found that the fact that there are no competing exchanges here and that we have the opportunity to work with government to create a business-friendly, efficient and streamlined regulatory system that will give us the needed credibility on the world stage, all combine to present a strong advantage for St. Maarten from a business and regulatory standpoint.

"Furthermore, with the availability of Voice Over Internet Protocol (VOIP) technology in the telecommunications area, St. Maarten's infrastructure deficiencies here did not present a significant disadvantage."

He said government's investment in a high-speed fibre optic Internet connection had proved to be a pivotal factor in the country's ability to attract the project.

St. Maarten was chosen because the island lies in close proximity to the East Coast of the USA and is served with daily nonstop flights from a number of cities, including Charlotte, North Carolina; Washington, DC; and New York/Newark.

He added that there was no language barrier, because primarily English was spoken throughout the island.

Tax reform

Miller said Parliament was expected to create a "favourable" corporate tax rate through new legislation "in the near future," which he said also had been a key factor underlying the group's selection of St. Maarten.

"A central part of our mission is to elevate the country and all of its citizens. If the proposed corporate tax reform is delivered in accordance with recent discussions with Members of Parliament, then the exchange will not seek any tax exemptions or tax holidays," Miller said. "This project's contribution to a sustainable tax base is the first step toward that elevation. ... Upwards of $30 million in taxes is forecast from the project's first year of operations alone."

In an invited comment, Roy Marlin said the corporate tax reform mentioned by Miller had been discussed as part of the ongoing initiative by Finance Minister Hiro Shigemoto that had installed the workgroup for the reform of St. Maarten's tax system. He said one of the items discussed for years had been the reform of St. Maarten's tax system, particularly the profit tax, which now stands at 34 per cent.

"This discussion must take place in the broader sense, which is a reform to make St. Maarten more attractive for investors, thus having to alleviate the need for tax holidays," Marlin said.

Miller said that in addition to creating significant new tax revenues, the project would have a tangible effect on the country's economy through job creation, use of local services and capital investment on the island, in connection with the construction of the project's data centre, operations centre and executive offices. That investment is expected to begin later this year.

Asked what basis had been used to calculate the company's projected $30 million in taxes in the first year, Miller said the specifics behind the company's revenue projections were confidential and would be the subject of its press release announcing its groundbreaking derivatives products, when the company was ready to roll them out.

"These derivatives contracts will be fully regulated and approved by the regulatory commission assembled by St. Maarten as we prepare for rollout, and government has already been apprised of the nature and anticipated issuance and trading volumes of these products," he said.

"Obviously, the level of corporate income that would produce these revenues is in line with the capital investment needed to build the project, which is estimated to be between $65 and $85 million. In other words, from such a capital investment, one would anticipate a significant amount of top-line revenue, such as what we are projecting."

Law governing

security exchanges

The Daily Herald posed a number of questions to authorities on the subject of security exchanges, such as who will oversee these institutions to ensure financial integrity, given that St. Maarten does not have security laws regulating such an exchange, such as the Securities Exchange Commission (SEC) in the United States, and what sort of relationship will these institutions have with the Central Bank and commercial banks.

This newspaper also asked whether local entrepreneurs would be able to raise capital in the exchange and whether government or any citizen could have shares in the exchange.

Roy Marlin said that while these issues needed to be addressed, they "don't necessarily need to be addressed at the decision-making to establish such a venture, as the law already exists."

He said too that some of the questions posed at this moment were premature. "This is the first step and parties now need to work towards utilising existing legislation which was established by the Netherlands Antilles Parliament for these sorts of institutions to be established.

"I don't think we should be making a comparison with the US SEC at this point in time. Supervision on these types of establishments is dedicated to the Central Bank and that is where the work starts among parties.

"[If, ed.] we weigh into issues that still need to be addressed and formalised in the next year before start-up, then we are defeating the purpose, which is first getting the venue to St. Maarten and after dealing with the different entities pertaining to supervision, etc., for which legislation is already established."

Marlin added, "A close cooperation will now be necessary among parties, including a very strict due diligence process."

He said he lived by the motto "If one doesn't try, one will never know if one can succeed."

"As for St. Maarten, the economic growth is stagnant and we need alternatives besides the sun, sea and sand," he said.

State of the art

Miller said the Exchange would be state-of-the-art, because it would employ technology never before implemented in the ground-up construction of such an electronic market.

He said recruitment of executive management with extensive experience in designing and building electronic securities exchanges had already begun and their talent and expertise would "lend phenomenal credibility to the project."

Site selection for the data centre, operations centre and executive offices has not been finalised, but these three different facilities are planned and budgets for them are being formulated, he said.

(Source: The Daily Herald Sint Maarten)

27 July 2011