Japanese regulatory bodies before the end of the year.

The designations, key in the development of the exchange as an international offshore capital market, include Securities & Exchange Commission DOSM (Designated Offshore Securities Market), investment exchange designation from the UK's Securities Investment Board and offshore securities market recognitions from the UK treasury board and from Japan.

BSX CEO William Woods told an Institute of Chartered Accountants luncheon that the SEC designation, the most significant, could come by October 31.

The BSX currently is an affiliate member of the International Federation of Exchanges and with the IOSCO, the International Organisation of Securities Commissions. The exchange is regulated by the Bermuda Monetary Authority, an IOSCO member.

He said expansion of the BSX trading membership hinges on the DOSM designation. There are now eight trading members including Nomura Securities, the exchange's first international brokerage firm, which joined in August.

The designations not only give the BSX various trading approvals but also additional credibility.

Bermuda competitors like Dublin and Luxembourg have such designations as do all major exchanges.

The designations will also keep Bermuda ahead of the Cayman Islands which has moved to set up a offshore exchange similar to Bermuda's, Mr. Woods said.

"Government in Cayman has now spent money to set up an exchange to compete directly with Bermuda,'' he said.

Asked if Cayman's initiative has generated concern at the BSX, Mr. Woods said the local exchange is following Cayman's move with interest but, realistically, "they are starting from scratch'' and it could take Cayman two years to reach the stage Bermuda has.

But Cayman cannot be ignored or underestimated as they have the ability to move quickly and efficiently, he added.

The competitor's move also "indicates the importance of developing an exchange,'' he said.

The impetus for setting up an international offshore exchange is to access an estimated $2 trillion held offshore.

"We know their are large pools of offshore capital not being utilised. Owners of that capital don't want to reinvest it back onshore.

"We want to free up that capital,'' he said.