The Gibraltar Stock Exchange (GSX) opened in 2014 as a technical listing exchange for open-ended funds, and is now in the process of expanding its offering to include closed-ended funds, asset-backed securities, insurance-linked securities, debt and derivatives. This broader offering will bring GSX into competition with more established players such as Ireland, Luxemburg and Malta, but may also make it attractive for small to medium-sized managers looking to establish a European listing quickly, and at relatively low cost with minimal regulatory burden.
Gibraltar is an EU jurisdiction in its own right, and a major part of GSX’s appeal is its ability to list certain asset-backed securities without the need for full compliance – under the Alternative Investment Fund Managers Directive (AIFMD) – an often expensive and time-consuming requirement that GSX believes has created an untapped pool of demand for an alternative. Historically, Gibraltar has always been the gateway to Europe, and this is a role GSX aims to emulate by offering EU passporting rights for certain securities with approved prospectuses. As such, the exchange may prove a useful first step into the European market, allowing funds to test products relatively economically before deciding whether to push for full AIFMD compliance.
The failure of a previous (separate) attempt to establish an exchange on the Rock – Gibex – has left the GSX team keen to stress the simplicity and robustness of its own model, including the early requirement for a ‘living will’ to ensure a controlled closedown, should GSX fail to reach critical mass. There remain serious challenges for the new GSX, including the issues with liquidity which have troubled the Malta and Luxembourg markets and, perhaps most significantly, the simple market inertia of managers preferring to opt for more established forums.
Several factors may, however, help GSX to establish itself. Gibraltar’s insurance industry has grown from 13 to 56 licenced insurers in the past 15 years, so in playing to that growth one focus is to offer an EU base for the insurance-linked securities or catastrophe bonds more often focused around Bermuda and the Cayman Islands. Demand for these products has grown quickly against a backdrop of low interest rates and volatile stock markets. More generally, GSX is at pains to emphasise its ability to bring about a listing quickly and economically, whilst the appointment of Grant Thornton and EY as member firms may further help to establish credibility. As such, managers looking for a fast, relatively low-cost EU listing may wish to consider GSX alongside its longer-standing rivals.