The Jamaica Stock Exchange is looking to launch short-selling of Jamaican stocks by December. 

Speaking with Kalilah Reynolds, Group Business Development Manager at the JSE, Andre Gooden, said there are still a few regulatory hurdles to clear.

“We’re trying to get it done by December but the absolute latest is January,” Gooden revealed.

He acknowledged that Jamaican investors have been waiting for short-selling to become available on the market for some time. 

However, he said the exchange is intent on rolling out the best version of short-selling that it can.

Short-selling refers to borrowing a security and then selling it on the open market. Investors can purchase it later at a lower price, pocketing the difference after repaying the initial loan.  

“So, it allows the investors to profit from an expected downward movement in the price of a security,” Gooden explained. 

The JSE executive noted that there is some inherent risk involved with short-selling. Therefore, the exchange is working diligently on criteria for investors and securities to become eligible to participate in shorting. 

“We don’t believe that every stock on the market is suitable for this kinda thing. You have to have a certain amount of liquidity in your asset to be able to fill and liquidate these positions,” Gooden said. 

He added that the JSE is working with industry stakeholders to establish the rules to guide the market. 

Vice-President of Investments at NCB Captial Markets, Stacy-Ann Tait, noted that short-selling will benefit the wider stock market through increased market efficiency. 

She explained that short-selling leads to price discovery, which is a more accurate representation of a security’s price incorporating all of the risks. 

“Short-selling benefits the market in that it forces the price of a security to now incorporate negative news and bad expectations. And, if price discovery is there, then regular investors can benefit from a truer price even if they don’t participate in short-selling,” she said.

In addition to short-selling, Gooden said that the JSE is also looking to introduce options trading. That project, however, is in its infancy. 

“That [options trading] would have a different set of rules which we have to solidify and get approved by all of the regulatory authorities first,” he said.

He added that the JSE is always looking to add new products to its offering but must be strategic with the roll-out.