Five real markets, four thin ones, and the liquidity problem underneath

Before the region debates a single exchange, it is worth being precise about what it currently has.

The Caribbean does not lack stock exchanges. It lacks depth.

Five markets in the region carry genuine breadth across instrument classes: Barbados, the Bahamas, the Eastern Caribbean, Jamaica, and Trinidad and Tobago. These offer short and long-dated fixed income, equities, and collective investment schemes. Beyond them sit smaller markets in Belize, Haiti, Guyana, and Suriname, trading largely in government securities. The structure is not a single market with regional participation. It is nine separate venues, most of them small, each with its own regulator, listing rules, settlement arrangements, and investor base.

The consequence is the one the Caribbean Development Bank named directly when it funded the feasibility study now underway: fragmentation limits cross-border participation. Combined regional market capitalization is low measured against other emerging markets, and individual exchanges are too small to generate the trading volume that makes price discovery reliable.

That matters in ways that are easy to state and hard to fix.

Thin markets widen bid-ask spreads, which raises the cost of entering and exiting a position and deters the institutional investor who cannot exit quickly. Thin markets make listing less attractive to the issuer, because a company that lists into a venue with few buyers does not achieve the valuation that justified the listing costs. And thin markets push regional savings offshore, because a pension fund with a mandate to diversify cannot fill that mandate from a domestic market of a few dozen names.

The result is a region that runs a persistent financing gap while simultaneously exporting its own savings, and finances development through bank credit and external borrowing rather than through equity.

There are signs of movement at the exchange level. The Jamaica Stock Exchange opened a Micro Market in June for raises between J$50 million and J$100 million, a tier explicitly designed for companies too small for the Junior Market. Cross-listing between Jamaica and Trinidad already functions. These are incremental and they are real.

What they are not is integration. A cross-listing arrangement lets a security trade in two places. It does not create a single order book, a common settlement cycle, or one set of listing standards an investor can rely on across nine jurisdictions.

The feasibility study now funded will produce a view on whether a single exchange is the right answer to that. Readers of this section should watch for three things in its findings: whether it recommends a single venue or a linked-market model of the kind used in parts of Europe and Africa, what it concludes about the supranational regulator question, and whether it puts a number on the liquidity gain. The third is the one that will decide whether finance ministers read past the executive summary.