Exchange (BSX) is attempting to distance itself from the pack.

This year the Bermuda Stock Exchange (BSX) has had a fair share of successes -- and delays -- in the race to become the premier listing locale for international securities. Aggressively chasing the BSX are the Cayman Islands, Guernsey, and next year the Bahamas.

BSX chief executive officer William Woods, while acknowledging the increased competition, believes Bermuda has put some distance between itself and the rest. He hopes the pack will be left baying in the distance with the initiatives currently in place, and the official recognition by the UK and an international watchdog organisation.

"If we sat around we would be wiped out in a couple years,'' Mr. Woods said.

"We are well ahead now and as long as we keep moving forward at a pace there will come a point at which we achieve a critical mass where people say `Bermuda is the only place to go', and the others will dry up. We are not there yet, but we believe that by next year we will be. It's the pedal to the mettle, full speed ahead in the next 12 months to really distance ourselves from this competition.'' Key to the BSX's success is recognition by the UK's financial services authority as a designated investment exchange. The BSX is already recognised by the US Securities and Exchange Commission. Mr. Woods admits the delay in UK recognition has been a big disappointment.

The recognition has apparently been held up by a delay in formulating the regulations for Bermuda's new Investment Services Act. The BSX sits on the committee helping to draft the regulations. The regulations will govern those involved in the Island's financial services sector, and provide protection for the public. BSX members follow the exchange's regulations, but others in the financial services operate largely unregulated.

"I think they (the UK) are stalling until the act becomes operational,'' Mr.

Woods said. "It creates a framework around us. The Act fills out the gaps around the exchange and makes Bermuda an international, regulated jurisdiction.'' As a designated investment exchange, securities listed on the BSX can be marketed more widely and easily in the UK. The designation also lessens the tax consequences for fixed income securities issued by UK companies and listed in Bermuda.

"That would help us on our debt side,'' Mr. Woods said. "A lot of things that currently go to Luxembourg we would get. There is definitely a lot of business that would come our way so it's a big priority.'' The BSX is also expecting to gain full membership in the Federation of International Stock Exchanges (FIBV). The BSX is currently an affiliate member and has completed the first year of the two year vetting period.

"I believe in the next 12 months we will get full membership by the FIBV, we will get recognised in the UK and put a huge distance between us and all the other offshore exchanges and potential competitors,'' Mr. Woods said.

Meanwhile the BSX has this year set up the infrastructure, personnel and computer systems to foster its continuing growth.

The BSX is currently in the final stages of testing a new private data network to connect trading members. The Bermuda Electronic Securities Trading (Best) system will be launched early in the new year. The GlobalScrip electronic book entry settlement system will also be implemented within the next six months.

Trading information is currently on Bloomberg where dealers can only input their best bids and offers. Using the Best system dealers can show other bids and offers allowing them to work the market.

The BSX will also move to a 9 a.m to 3.30 p.m. continuous trading sessions.

Currently the trading day is broken into two sessions. Bloomberg will still be used as the BSX's major information channel. All prices and volumes will automatically feed into Bloomberg, while orders will be entered and executed using BEST. In another year Mr. Woods hopes those using Bloomberg will also be able to trade into the Best system.

"Best is going to have a dramatic effect,'' he said. "In other markets where Best has been introduced volume has more than doubled. We anticipate that next year.'' Liquidity of local stock has always been a problem on the BSX. There have been many days this year with very low trading volume, and sometimes none at all.

Mr. Woods anticipates trading volume in domestic securities to reach about $100 million by the end of this year, the same as 1997.

The BSX scored a major coup this year when Instinet, the brokerage arm of Reuters Group Plc, started using the Island for executing billions of dollars of cross trades. Cross trading is the ability of a BSX trading member to do in-house trading on the exchange between two of its clients in US securities while those markets are closed.

Until Instinet came along, the facility was used mainly by Nomura Securities (Bermuda) Ltd., offshore subsidiary of the world's largest securities firm.

Nomura switched from the Cayman Islands to Bermuda in 1996.

Currently about $22 billion worth of cross trades have been executed on the BSX, double that of last year.

As part of a strategy to market products based on the insurance industry the BSX is about to launch Catex International, an offshore electronic risk exchange facility. Under an agreement with New York-based Catastrophe Risk Exchange Inc. members will be able to cede, exchange, or purchase risk on the Catex system.

Deals were previously done over a private network but Catex has now switched to the Internet. The system, which is also available to the London market, has already attracted subscribers on the Island. About 30 trades have been completed.

Other successes of the year include: The addition of three new trading members, including Instinet; The introduction of a listing sponsor category of membership. The BSX now has four listing sponsors; The listing of three international companies and one international debt issue.

Two new international companies are slated to list within the next month; The listing of 63 new mutual funds, bringing the total to 170, and total listed securities to 250; The introduction of new listing regulations for specialist debt and insurance securitisation products. The first specialist debt programme has applied for listing. Mr. Woods expects an application for the first insurance securitisation to be made early next year; The launch of the FTSE/BSX index to track the performance of the Bermuda insurance market. A local investment firm launched a mutual fund tracking the index; The amendment of the BSX private act to clarify that the company's limited liability status, protecting members; And, the amendment of the listing regulation making the definition of sophisticated investor more flexible while maintaining US requirements. Mr.

Woods said the amendment will help foster the BSX mezzanine market for development stage companies.

During the year the BSX market capitalisation surpassed the $50 billion. The BSX has also added two new staff for a total complement of 12 to meet the additional demands.

Still with all the successes, there is still work to be done in increasing the liquidity in the domestic market. Mr. Woods admits the BSX has not made as much progress as initially planned.

The BSX will launch a publicity campaign next year, and hold seminars to encourage companies to list on the exchange. There has been an improvement in the area of corporate compliance to the BSX regulations, he said.

Responding to criticism the BSX has spent more time developing the international market rather than concentrating on the domestic part of the exchange, he agrees.

"There is no doubt we spent more time developing the international business than the domestic in the last 12 months but for a very good reason,'' he said.

"It's the fees that come from the international business that enables us to improve the domestic market. If we just focused on the domestic market those members would have to invest a lot more on the exchange.'' He said members and listed companies will be able to look back and see the improvements working for them by the end of next year.

"We have got Best coming on board which is going to dramatically improve the trading experience and GlobalScrip which is going to reduce their back office costs so in the next 12 months they are going to see a tremendous benefit there,'' he said. "This investor campaign is designed to generate more clients and more trading so they can benefit. We should be reducing their costs and if the campaign goes well increasing their revenue. Hopefully next year they will be able to say things have improved. We couldn't have done any of it unless we had developed the international piece first. That's the way it had to be.''