May 22, 2020

Markets Work: How Bermuda Stock Exchange Is Navigating COVID-19

Nasdaq is committed to the resiliency of the global market ecosystem during this time of unprecedented change in our industry. Our Market Technology community, which includes market infrastructure organizations spanning more than 50 countries, is truly keeping markets up and running. With exchanges laying the foundation for capital formation and job growth, these organizations will continue to play a critical role in the health and recovery of local economies around the world and greater global capital markets ecosystem.

Greg Wojciechowski

We sat down with Greg Wojciechowski, President & Chief Executive Officer of Bermuda Stock Exchange, to discuss how his exchange is managing the current environment for their stakeholders, members and employees.

1. How is COVID-19 affecting your client base? 

When restrictions were first implemented in Bermuda in mid-March, there was an initial phase of adjusting to social distancing and working remotely. Having now operated under these restrictions for almost two months, we have adapted to what is likely to be the new normal for the foreseeable future.

For the most part, it is business as usual at the exchange, and we continue to list new securities, support daily trading, settlement and to operate our securities depository. The BSX was an early adopter of FinTech and has been a fully electronic exchange since our inception in 1993.

With our exchange platform being fully electronic and our securities being dematerialized and held in electronic book-entry form, addressing business interruption and resiliency was more or less built into the platform from the beginning. As a result, we were prepared to address business interruption from events such as COVID-19 with minimal impact on our robust operating systems, which have proven efficient during this unusual period of market operation.

2. Are you changing how you interact and communicate as a result?

With air travel severely restricted – Bermuda’s airport has been closed since March 20 – we can no longer travel for business meetings and conferences in other countries. As with many organizations around the globe, we are using internet-based platforms for virtual meetings and taking calls as normal. We implemented our business continuity plan early in the crisis, and some of our staff have exemptions from the ‘stay in place’ restrictions applied by the Bermuda Government and can work from our office location in Hamilton. Most of our staff, however, are working from home and have highly secure access to our business operating systems online.

As an example of adapting to restrictions on normal operations during the COVID-19 state of emergency, listed Issuers are able to submit documents for filings electronically that would normally have been filed in original, signed or certified form.

3. How are your systems impacted by the current environment, and how do you prepare for this type of situation to help ensure a resilient, operational environment?

We have experienced minimal operational impact. Bermuda is no stranger to dealing with disasters and natural catastrophic events – it’s the business many of our on-island insurance, reinsurance, and alternative risk transfer companies specialize in, and we experience hurricanes with some frequency due to our geographic location.

Bermuda has robust infrastructure that has been tried and tested, so when the COVID-19 Pandemic restrictions began, companies on the island implemented their disaster recovery and business continuity plans to ensure minimal operational disruption. As a stakeholder and critical component of Bermuda’s financial services infrastructure, the BSX also continues to stress-test its resiliency and adapt business continuity plans as warranted by evolving underlying market conditions. 

The BSX and Bermuda are tightly aligned with the philosophy of market operators globally and, as a member of the World Federation of Exchanges (WFE), adheres to the philosophy the WFE outlined in March, namely that ‘Financial markets provide businesses with crucial funding, and risk management products and services…. It is important that markets remain open and that the hours of trading remain as normal, to preserve the benefits of price formation and access to liquidity for society.’

4. What are some of the things you’re most happy to have accomplished over the first part of this year amidst a truly chaotic market environment?

Firstly, the speed and efficiency with which we implemented business recovery and continuity of the exchange’s operations due to the COVID-19 Pandemic.

While the BSX has concentrated on organic growth and developing the foundation of the exchange, we have also been focused on our electronic exchange environment, helping our domestic capital market develop and gain international recognition so that we are appropriately regulated and recognized to support future development.

The BSX is the world’s leading exchange for the listing of Insurance-linked Securities (ILS) – a US$40+ billion market at the end of 2019 – with approximately 85% of the market cap global issuance outstanding. The exchange continues to see more catastrophe bond listings and has demonstrated the ability to provide visibility, information, and regulation to the ILS asset class. The Pandemic has confirmed the non-correlation and resiliency of ILS vehicles to broader financial market shocks and volatility. The BSX’s track record in this sector has led to the recognition that the exchange is a global leader in supporting exchange-traded risk.

It’s a logical and natural evolution that the continuing convergence of capital markets and the insurance industry occurs in Bermuda, which for many years has been known as the ‘World’s Risk Capital.’ As momentum builds, the ILS market continues to be attractive for established investors such as pension funds looking for non-correlated risk as well as new investors looking for a hedge against market volatility that looks set to continue into 2021.

We were also pleased to complete the integration of the BSX into the Miami International Holdings (MIH) Group of Exchanges following last year’s successful tender offer resulting in MIH obtaining a controlling interest in the BSX. While advancing MIH’s corporate strategy of geographic expansion to serve a greater portion of international exchange operators, there is also support towards the development of a strategy in the futures and derivatives market in Bermuda. The new relationship with MIH will prove mutually beneficial as Bermuda’s (re)insurance risk transfer industry and the BSX’s contribution to its products and services are strengthened by MIH’s ability to provide additional support and innovative products to the evolving global (re)insurance and alternative risk marketplace.

The BSX has also seen an increase in interest from the global capital markets for an alternative, internationally recognized exchange platform for the listing of international debt instruments, especially from Latin and South America.

Bermuda’s innovative approach, as seen in the reinsurance industry, has also been reflected in the development of regulatory strategies to provide the market with certainty in the digital asset area illustrated by the implementation of the Digital Asset Business Act (DABA) and ICO legislation. The BSX is in the process of leveraging this important legislation to support market participants in this developing area.


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