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An exchange open to innovation

By Tamara Menteshvili, chief executive, Channel Islands Stock Exchange

Right from the beginning, the Channel Islands Stock Exchange (CISX) has sought to accommodate hedge funds. In fact, the exchange's very first listings in October 1998 were two hedge funds from Man, and since then we have embraced the listing of a wide range of alternative investments, including hedge funds and property funds. Today we have well over two dozen funds of hedge funds and various single-manager hedge funds, out of a total of more than 700 listed securities, and the list keeps growing.

The CISX offers alternative funds a number of advantages. First and most important, we are very open to innovation, so even if we are presented with unusual or complex structures, we don't shy away from working with the issuer to see how these funds can fit into our existing framework.

The exchange can be very flexible with respect to the listing rules. Although there are always certain requirements on disclosure of information, these are not onerous, and there is flexibility as to what type of international accounting standards the issuer may want to adopt. We are also very cost-effective.

In addition, many fund groups need to hold regular board meetings in the fund's domicile jurisdiction to satisfy the conditions of their tax status, and we offer a location within easy reach of the City of London and other leading European financial centres.

The other dimension that the CISX offers is that closed-ended vehicles may be traded with the added benefit of full CREST settlement, and the exchange has market makers. The ability to trade shares on the exchange, or utilise the order book facility, can be an answer to questions about liquidity. This facility is something that not all stock exchanges can offer investment funds.

The kind of corporate structures used for listed hedge funds range from protected cell companies to straightforward closed-ended investment company, while some vehicles such as funds of hedge funds use open-ended structures. Some listed funds are domiciled in Caribbean jurisdictions, although the funds of hedge funds are predominantly Channel Islands-based.

The introduction of Jersey's Expert Funds regime and, more recently, Guernsey's Qualifying Investor Funds regime will certainly encourage fund promoters to use the CISX. Opportunities to encourage different types of structure and improvements in the ways the islands' respective regulators process applications can only help attract more business to the islands.

This idea of being able to launch a vehicle from Guernsey - or Jersey - and list them on the CISX is much more appealing now than it ever has been, especially as we encourage different types of structure. However, it's worth remembering that nearly half of our listings are internationally-based funds or structures.

Apart from meeting investor expectations that securities should be listed on a recognised exchange, the exchange can offer promoters distribution benefits, depending on where they intend to market the fund. For example, for UK investors a CISX listing makes a closed-ended fund ISA-able, PEP-able and SIPP-eligible. It adds value to what otherwise might be a closed opportunity for the investor.

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