Keith Duncan, president of the Jamaica Securities Dealers Association, wants a lifting of restrictions on foreign exchange trading, saying the laws that guide the market are outdated and limit certain type of product placements.

The brokerage houses, it appears, feel choked by regulators and have been saying more openly that they want the authorities to ease up on their grandfathering role and allow traders to satisfy the demands of clients, especially those with risky appetites.

Duncan, at a JSDA meeting in Kingston, said the central bank should redefine its criteria for who can trade in currencies.

Section 22(a) of the Bank of Jamaica Act stipulates that "no person shall carry on the business of buying, selling, borrowing or lending foreign currency instruments in Jamaica unless he is an authorised dealer."

That authorisation comes from the central bank.

Section 22(b) also prohibits different classes of dealers from acquiring foreign assets, aprovision they can get around but only by waiver from the Minister of Finance.

It's a critical piece of legislation, which needs to be amended, the dealer said.

"In an open economy with an active foreign currency market, firms wish to have the option of issuing debt in foreign currency in the Jamaican capital markets without seeking an exemption from the minister to do so," said Duncan.

"Their counterparts in the Caricom jurisdictions already have that option."

High-risk return

His entreaty comes behind a wave of controversy on the high risk return currency trading activity pioneered here by David Smith's company Olint.

Olint and the Financial Services Commission are duking it out in court on whether the company's operations amount to securities trading and should therefore come under the scrutiny of the FSC. Meantime, individuals are signing up for currency trading courses and dabbling in trading as they chase the type of returns — 10 per cent per month or 120 per cent annualised — that Smith was said to be paying his 'club members'.

Duncan said, while dealers were restricted by the law, the market was demanding financial assets to satisfy their need for foreign currency at attractive yields in which to invest.

By allowing dealers to issue foreign exchange instruments without restriction, Duncan argues, not only would dealers by satisfying market demand, but would also be facilitating capital formation.

"The JMA has been clamouring for the narrowing of spreads in the Banking sector but no moral suasion will dictate the re-pricing of loans for commercial banks," he said.

"The only way to bring down spreads is to increase competition in the market for credit by facilitating the issuance of debt securities through the capital markets, originated, underwritten and distributed through licensed securities dealers."

business@gleanerjm.com